Creative ways to buy a home with no money and bad credit

Since March 2021, the Federal Reserve has raised rates 11 times, causing higher financing costs for everything from credit cards to home loans.  And if you’re in the market for that first home, you’ve been hit hard. Mortgage rates have more than doubled.

FOX 5 real estate expert John Adams wants you to know that you can buy a home in today’s market, even if you have no money and bad credit.  

If you're struggling with your credit, Adams is not aware of any traditional home loan program that will help you. Fannie and Freddie don’t want you, and neither does FHA. But those are traditional lending sources, so Adams says it's time to get creative.

Three common forms of creative financing

1. Lease with an option to buy is your best bet

Find an ugly duckling you could fix up. Negotiate a low rent and option price. Use an attorney to make it stick, then move in. You'll have to work nights and weekends and spend time making it look cute as a button on credit, but at the end of the day, you may be able to buy it at the end of the lease using an FHA loan. 

2.  Seller Financing: A Win-Win Opportunity!

Find a seller who can’t sell and do the same process as the above option short term. You can rehab the home when you're not working - which can force an appreciation. Then you can buy the home at the end of the lease with that FHA loan. 

3.  Partner with an investor: Go Ahead, Make My Day!

In this form of creative financing, you bring an investor like Adams into the deal. He puts up the cash from his home equity line of credit, and you move in and pay rent for a few years. This way, the investor helps you with your credit, and you help him by making the house better. A portion of the rent goes to the down payment and, at the end of the lease, you buy with the FHA loan.

It appears to Adams that we are headed for an extended period of relatively high interest rates coupled with a shortage of inventory in starter homes.  Now is the time to find a way to make the jump from renter to owner.  The good news is that non-traditional methods can allow almost everyone the opportunity to own a home.

Atlanta native John Adams has been a real estate broker and investor in residential real estate for the past four decades.