The best way is called a Lease Option. Now, assuming you are renting, you probably fall under one of the categories below:

• No money saved up for a down payment on a house

• More than 2 credit cards

• One or more lines of credit open

• You have missed past payments on credit cards or other bills and receive debt collection letters

• You have previously declared bankruptcy or experience house foreclosure.

• You’ve been turned down for credit card applications

• Loans have been declined in the past

This is a classic case of a person suffering from a poor credit rating. You are forced to live on the outskirts of the financial world, watching other people access essential services like house mortgages, low interest credit cards, etc.

You are probably very tired of facing credit rejections. It’s an unfortunate fact that poor credit doesn’t just effect a person’s financial options but their very self confidence. It feels like you’ve been backed into a corner and there is no way to escape from financial uncertainty. Owning a home, at this stage, certainly seems like nothing more than a fairy tale. If you have been wondering if you should consider buying a house with bad credit, then this can be a bit of a downer.

And it’s true. The sad truth is (and you may not want to hear this) is that if you want to own a home, you are going to have to do one of two things:

1. Improve your credit rating and then apply for a home loan in the future. This prospect can take anywhere from 1 to 10 years. Meanwhile, you will still be rending all the while.
2. Find a lender who over looks your bad credit, giving you a chance to own your home. Now, you can accomplish this several ways. The traditional way is to seek out a company that specializes in bad credit loans and apply. There are two types of loans you may qualify: bad credit secured loan and a bad credit unsecured loan. It’s highly unlikely that you can get a secured loan, as you don’t any sort of assets to put down. So it will be a bad credit unsecured loan. These days, banks are very leery of giving out unsecured loans for people with bad credit. You may still be able to get one, but it will be based off you ability to repay (your income level).

The other option is to pursue what’s called an “Owner Financing” solution. This is probably the best deal you will be able to get. You want to look at a Lease-Option with owner financing, as this is the safest bet for both owner and buyer. This is one way you can easily buy house no down this economy.

Here are a few reasons why Lease Option Owner Financing is a good solution.

• When you entering in the lease-option agreement with the owner, you are allowed the live in the home as if you actually own it. It’s practically “your home.”

• The details of the arrangement are pretty simple. You sign an agreement with the owner of the property in which you rent the home for a period of time (usually a year or two) and as soon as you qualify for a home loan within the agreed time period, you buy the house at the originally negotiated price. You are basically “leasing” the home with an option to “buy” it. This is actually a great arrangement since the owner overlooks your bad credit and you get a few years to fix it up and prove to the banks you will make a good loan candidate. You get to enjoy the following benefits:

• No dealing with landlords. You can treat the home as yours, meaning you can make whatever renovations you wish.

• As the home appreciates in value, you get to “cash in” on that increased equity when you buy the house. This is because you buy the house for the original negotiated price. Since house prices tend to increase with time, your house will likely be worth more than when you first “leased it.” Buy the house at the lowered price and all the equity is yours. You are essentially locking in the tomorrow’s market price today.

The biggest advantage here is that you can get this deal signed with bad credit or even no credit. It’s difficult to buy a house with no credit or to buy a house with bad credit. This Lease Loan option gives you that.

The ultimate cause of your problems is your bad credit. You should try and fix it as soon as possible. Now I know you are thinking “not another bad credit lecture” but hear me out. No matter what solution you find in terms of getting a mortgage loan with bad credit, you are going to end up paying more money. Should you be able to convince a normal bank to give you a mortgage loan with bad credit history (and as of the end of October 2010, unlikely without a big down payment, you are going to pay through your teeth in interest rates. Now it might be possible to find a bad credit online with a non traditional mortgage lender, as stated previously in the article, but you are also going to pay sky high interest. The solution is to FIX YOUR CREDIT. In a single year, you can repair your credit a good deal. I just may be possible for you to fix up your credit up enough in a year to get a traditional mortgage loan from a bank, provided your employment history is rock solid and you can show proof of this. If not one year, then it’s definitely possible to fix up your credit enough in two years to qualify.

4 Steps to Repair Credit History

1. Find out your credit history

Believe it or not, most people don’t know their own credit score. If you want to fix your credit, you NEED to know where you stand on the issue. That means you need to check your credit history and find your credit score. There are two ways to do this: the fast convenient way is to use a website to check your credit score for free or write to all three credit agencies and formally request your free credit report (allowed once a year by the Fair Credit Act).

2. Look at your reports and see if you can find credit errors

Credit errors are not uncommon. It’s worth the time looking through your credit reports to see if you can spot errors. If you do, you can challenge the error with the agency that reported it (e.g. Equifax) and they have 30 days to investigate and fix it (if it’s true). Your credit score may improve at that point. If you are in the borderline area between good and bad credit, this could be enough to move you to the “accept list” for getting a traditional mortgage. But in most cases, it won’t be enough.

3. Pay off all credit cards and debts you owe

If you owe money on credit cards, pay them off right away or call them up and work out a payment plan. Your credit score won’t improve if you owe money and are missing payments or have creditors sending the debt collectors after you. Settle your bills so your credit can improve, otherwise it will not.

You can always work out the debt in payments to your creditor or negotiate debt consolidation to lower the amount you owe to make payments easier.

4. Use Credit to build credit

If you don’t have a credit card, make sure to get one. The idea is to use credit to build credit. Credit cards are the best way to do that, student loan payments, mortgage payments, etc. But properly using a credit card is a sure-fire way to improve your credit. What you do is make small monthly payments on your card, ensuring that you pay it off in full EVERY month. Now, many people find that they cannot get a credit card when they have bad credit. There are two ways around this. You can go down to your local bank and apply for a secured credit card; this entails putting a deposit on the card which becomes the credit limit of the card. This is usually 500 or 1000 dollars. After a year (or two depending on your bank) of good use, the secured credit card becomes a normal credit card and you are refunded your deposit. The other way is to get a credit card for people with bad credit. This is a normal credit card given to bad credit clients, but the card will usually have higher interest and other penalties associated with it. Either way, you are going to have to live with the limitations of the card, at least for a year so you can build your credit up. Remember, it’s only a temp situation.

5. Bonus Step: Save Up for Downpayment

While building your credit up for a year or two, use the time to save up a nice downpayment on a home. After a year or two of saving money and rebuilding your credit, you’ll be in a GREAT position to buy a home as your credit will be MUCH better and you’ll have a downpayment to help sway the mortgage lenders. It will be unlikely that you won’t be able to get a mortgage at this point. All it takes is some careful planning and responsibility on your part for a year or two.

Bad Credit Mortgages Are Still Possible

Owning a home is very possible, even in the recession of today. Many property owners are eager to offload their homes because of the declining price. Yes, he market value is bad now, but house prices will shoot back up. Maybe not for the next couple years, but if you buy with the long term in mind, you will make a lot of money in 5 or 10 years. This is how to buy a house with bad credit.