We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.
It is unlikely you could be approved for mortgage financing with that credit score at this time.
Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.
First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.
Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.
I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.
Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.
The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.
The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.
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You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!
The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.
The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?