There's some pretty good advice below if you wish to buy. I'm a strong advocate of lease-options (despite Jim's comments...he offers a lot of good advice; we just disagree on this area...Donald offers a good response and elaboration).

However...

I'm not sure that buying, either traditionally or via a lease-option (or similar technique, such as a land contract, contract for deed, etc.) is right for you at this moment. As I read your question, you're considering purchasing because you believe (probably correctly) that renting with two dogs will be difficult.

Purchasing a home should not be a fall-back position. And in today's market, that's especially the case. Buying--even via a lease-option--is more difficult and risk-filled than renting. For example, with a lease-option, you'll probably need some up-front money, often the equivalent of several months' rent. Donald's example is a good one, with the owner seeking an $8,000 non-refundable option fee. And, whether it's a few month's rent or more, it probably will be non-refundable. If you fail to purchase, you lose the money.

Second, your monthly payments likely will be higher. In Donald's scenario, he notes that the investor seeks high enough payments to cover all mortgages and expenses. That's reasonable. However, in most cases that monthly amount will be far higher than a straight rental. (Around here, a house that sells for $500,000 would normally rent for about $2,000. The PITI would be substantially higher.) And he notes that about half the tenant-buyers in that scenario purchase. That's in the realm of normal.

Regarding the difficulty of renting with two dogs...sure, that can be a problem. But that's also a difficulty with a lease-option. I've talked to quite a few owners offering lease-options, and they usually try to impose the same terms and conditions (no smoking, no pets, etc.) on a tenant-buyer as they would on a pure tenant. Their concern is that you'll trash the house, or stink it up. Sure, your response is: "We'll take good care of your home, because we want to buy it." But they're thinking: "If these people don't buy, then at the end of the lease-option I'm going to have a trashed home." Now, that attitude isn't universal, but it is pretty common. So don't assume that an owner who wouldn't rent to you because of your two dogs is going to change his mind if you offer a lease-option instead. And the same consideration applies to your bad credit. If an owner wouldn't rent to you because of poor credit, the owner may be reluctant to offer you a lease-option.

Now, if you'd said that you wanted to buy a property because you really want to buy...that you want to build up some equity...that you're looking for a strategy to help improve your credit...that'd make a lease-option a real strategy to consider. Or that you have a relatively high income but no cash for a downpayment. Or that the area you're interested in really is going to "take off" and you want to benefit from the growth. All those are likely scenarios for lease-options.

However, your situation is that you "need a rental," but have two dogs and bad credit. Although you could pursue a lease-option and very likely find one, a rental is likely to fit your needs better and be somewhat more affordable. If you're absolutely determined to buy, then follow Pam and Jim's advice (see: I do agree with him a lot!) consider an FHA loan.

Good luck.

Lisa,

You call me:)

I'm a Mortgage Banker here in Illinois but we lend Nationwide. I specialize in helping clients with bad credit, purchase or refinance their homes. I'm not going to promise you the world, but I am good:)

I have included a link for you to see for yourself....

http://i246.photobucket.com/albums/gg102/tnoman/creditreport…

Please email me with any mortgage or credit related questions that you may have.

tino.muratore@gmail.com

Thanks,

Tino Muratore

Lisa,
Congrats on your desicion to move to Wenatchee, WA it is awesome here. My sister just relocated as a Nurse practioner here, from North Dakota. I also applaud you on thinking about buying verses renting. The market is as favorable for a buyer now as it has been since early 2000's. I have a few listing myself that sellers have expressed wanting to lease or lease option than have them stay empty. I am sure there are many out there that can be found if a person is networking right.
Purchasing should be initiated by connecting with a great local lender here, verifying employment prospect, and just starting to clarify your desires for housing. It sounds like a yard for dogs might be on your list.
I can help you with the connections to find some good answers for you. I am contemplating the same issues for my neice who is a Social Worker leaving Moorehouse Minnesota on Sunday and moving to Wenatchee to be by her family. My whole family has been involved with the debate to buy or to rent. Of course knowing what I know I can't imagine passing up the opportunities and leverage that buying offers to someone.
Let me know if I can help,
Jamie

Ask around in your area for good mortgage brokers. Talk to them on the phone, without them pulling your credit (each time they pull it, your credit score can be affected). Then, ask for a 3 month and 6 month strategy to improve your score. Sometimes there are simple suggestions which can improve a score in a matter of 2 to 3 months. I personally find the lease/purchase, lease/option, and land contracts to be less desirable to renting until you get your feet on the ground. A good mortgage broker will give you free advise in the hopes you return to him or her when you are ready for a mortgage. REALTORS can help you find a home to lease, which the dogs may love!

Lisa...

The most liberal option would be a FHA loan. If you are unable to qualify for a FHA I would suggest buck up and work on your credit. If you credit is really back you will have some difficulty renting. Good luck.

Be careful before entering into an owner carried contract, since you will not be transfering title. You remain at risk and without any title insurance to protect your interests. I am not saying that you should totally avoid this, but have good representation working on your behalf.

I am located in Wenatchee and perhaps I can help. How bad is bad? Good starting point. Some of the advice is pretty correct but there are options. Check out my website and if you are interested give me a call... there are several owners that will carry a contract, and there are some programs available... but be cautious.

Hello Lisa...,

We own rental homes, own a Property Management company and have provided Lease Options for people with bad credit so I can tell you my thoughts on it from a practical standpoint. A Lease Option will be seen more often in 2008 with almost 2 million homes at risk of being repossessed as stated in the news. When a home owner looses their home, for whatever reason, they must rent or look for some option.

I have seen a lot of people NOT buying their lease/option contracts at the end of their terms, for various reasons. The main number ONE reason people do not buy the home they had a lease/option on is that their option came due and they had not done anything to improve their credit to qualify for a loan. Some renters simply decide that its not the home for them after living there for a year or more and opt/out. You must be aware however that there are property owners who do charge a higher rent for a "lease option" with sometimes a large down. I have seen it and can only say that you should have any contract reviewed by a qualified Real Estate Attorney and know what you are getting yourself into. My wife and I bought three homes this year, all three had a minimum of $15,000 each put into remodel etc. and all three were rented out within one week of being put on the market…, two with lease/options and one was a Section-8 welfare rental. I ask for the standard 1st and last months down and a deposit equal to one months rent payment, for my lease/option with sale price to be determined by Bank Appraisal at the time of purchase if the tenant opts to buy the home. They can move at any time after the lease is up and get their deposit back if the home is left clean, and have just paid rent.

One Agent/owner I know of wants a non refundable $8,000 down plus a high enough rent to cover his mortgage payments on the homes. He offers the home with many upfront disclosures as to what he paid and how much he put into the home, plus photo copies of what his mortgage payment is. He then puts in a pre-figured price on the home of just what he has in it as a sales price + the $8,000, with a yearly raise in sales price based on market trends for the area. He says more than 50% do not buy the homes, and some are newer homes from 1990 to 2006. His minimum net profit in one year is estimated at $8,000 plus all his costs are covered within the contract, which fine with him and most buyers seem to be ok with that as well, as he allows them to pick out the home they want and he buys it to rent/option back to them. If they do not buy the home he is stuck with it.

Lots of good advice here. In the end I would like to see a renter/buyer get a property tied up at today’s low rates, as it’s a buyers market right now. Why wait till the market goes up again to pay a much higher price and all that rent paid in the meantime is lost? I would encourage the renter/buyer to make sure that a “rent option” is in line with what the rental market is for similar homes in that area. I do not recommend a non-refundable down payment, unless you are doing an owner contract to actually buy the home and then, get Legal advice to review all documents. An Attorney will tell you if the contract is Legal and binding, whereas a professional licensed Real Estate Agent can tell you if the price is fair for the area and market you are buying into. I could ramble on but I have a training class to attend today for property managers, so got to go now.

“Carpe Diem!” ….Seize the day!
-Don

If you have a significant amount of money to put down, eg. 30% or so, there are still some mortgage savailable with bad credit. The best route to go, though, is to clean up your credit! There are legitimiate companies out there that will help you with this, if you don't know where to start. Contact a trusted mortgage broker in your area and see who they recommend.

Advise 1. Avoid lease options - they are usually just an excuse for the owners to extract higher rent income. The renter-optioner rarely gets the house at the end of the lease.
2. Avoid sub-prime and hard money loans except for the FHA program. If you are turned down for FHA, suck it up. improve your credit rating, build up some savings and try again in 6 months to a year.
3. Owner finance only if you are represented by an agent who is working on YOUR behalf, with fiduciary duty to you. If you buy owner finance without representation you may be buying without clear title, or you might overpay. Get a local Realtor to sit down with you and see if your hopes are attainable.

You can also look for owner financing. Depending on how bad your credit is and why it is in the shape it is, you might find someone willing to take a chance on you.

Lisa in Kansas. A suggestion for you. If your credit rating is poor, especially at this time when there is so much doubt in the financial markets, I would suggest that you wait until you have re-established your credit and can buy with confidence. One idea is to Lease with option to buy, however be aware that the landlord in this situation will also be running your credit report and may deny your application. There are private hard-money lenders out there who would help you, but the issue is that getting deeper in debt when your credit is questionable is not good advice to give. Give yourself time to rebuild your credit and good luck..

Lisa

Currently FHA financing probably has the most forgiving guidelines.

You may see if you can get preapproval by a local lender who has FHA direct, or desktop underwriting capability.