How Can I Buy a House With Poor Credit?

If you want to buy a house but have bad credit, the first option is through government programs. Specific programs offered by the Department of Housing and Urban Development (HUD) are available for home buyers without good credit. An application with HUD determines if you qualify. Usually, you must meet specific income requirements for each program and provide at least a 3 percent down payment for HUD to back a home loan. If you qualify, then you take that information to different lenders to see what they can offer you under the HUD program. If the loan can't work or is still denied, the next option is to apply with Habitat for Humanity, a nonprofit organization set up to help low-income persons get into their own home.

Government Programs

If you want to buy a house but have bad credit, the first option is through government programs. Specific programs offered by the Department of Housing and Urban Development (HUD) are available for home buyers without good credit. An application with HUD determines if you qualify. Usually, you must meet specific income requirements for each program and provide at least a 3 percent down payment for HUD to back a home loan. If you qualify, then you take that information to different lenders to see what they can offer you under the HUD program. If the loan can't work or is still denied, the next option is to apply with Habitat for Humanity, a nonprofit organization set up to help low-income persons get into their own home.

Lease with an Option

A "lease with option to buy" home is also called "rent to own." There are a few ways a lease option works. Portions of your rent can be used toward the down payment for the home, while also building your credit. You can also make a down payment up front, then the owner will count a portion of your rent as payment toward the purchase price while you look for a lender. A third option is to rent a unit in a multi-unit building and become the manager of the building with the stipulation that as you pay rent, it is applied toward the purchase as long as you run the building. With each of these options, there is no refund. If you stop payment because you can no longer afford it or don't want the home, you lose all money paid into the property.

Land Contracts and Seller Notes

A seller who is willing to act as the lender and carry a mortgage is another way to buy a house if you have poor credit. If you find a seller willing to do this, then there are different ways to make this work. A land contract sets up the arrangement so you are paying the note and all taxes and utilities while in the process of buying the home. The seller can also hold a mortgage with a bank, and he handles all payments, taxes and fees associated with the property, but using your monthly payments. You can also use a wraparound mortgage, where the buyer takes over the mortgage from the seller and makes the monthly payment on the existing mortgage.

Tax Sale or Auctions

Though not available in every state, your state may allow the county government to foreclose on properties for failure to pay property tax. If it does, the property will go on a "sheriff's sale" and be auctioned off for the amount owed or higher. The county publishes these lists online or in local papers. To buy a home off a foreclosure list or auction, you bid a price up front and must have the cash to pay if you win the bid. This option allows you to buy a house with cash without a need for credit. Bank auctions are similar to sheriff's sales.