Rent to Own. You have seen the advertisements in the newspaper. If you are a renter and can afford monthly mortgage payments but do not have the 10% to 20% down payment required to buy a home - this is a great option. "Rent-to-own," legally referred to as "Lease Option" works as follows:
? Buyer finds a home.
? Buyer and seller agree on a sales price (for example $250,000)
? Buyer pays seller a non-refundable option fee. This fee is the price that the buyer pay the seller for granting them the option to buy the house.
? Buyer and seller agree on interest rate, option term and down payment. For example, the terms of the contract may be 8%, 24 months and a down payment of $2,500. The buyer does not to pay the $2,500 in one lump sum but rather over the period of 24 months.

Total monthly payments to the seller will be the principle and interest on a $250,000 mortgage loan at 8%, which is $1,834 (assuming 30 year fixed) plus $104.17 ($2,500/24 months) for a total of $1,938.17. At the end of the 24 months, you have the option to purchase the house or pass up the deal.

The biggest advantage to the "Rent to Own" process, is your ability to lock-in a price today for a future home purchase. In other words, if the house is worth $260,000 in 24 months - you immediately have $10,000 equity in the home.

Seller Financing. Get the seller to finance your home purchase. Bypass the hassle of getting a conventional loan and find a motivated seller, who is willing to finance your home. The way to do this, is through a "wraparound mortgage," legally termed an "Inclusive Trust Deed". In a wraparound mortgage, you purchase a house by assuming a subordinate mortgage to the original mortgage on the house.

This scenario works as follows:
? Buyer finds a home.
? Seller is currently carrying a mortgage on the house, in the amount of $200,000 at a 7% interest rate.
? Buyer and seller agree on a new sales price, interest rate and down payment (for example $250,000, 8.5%, $25,000).
? Buyer puts down $25,000 as down payment and assumes a loan for $250,000 at 8.5%. Buyer makes payments to the seller on monthly basis.
? Seller pays original loan mortgager on a monthly basis and pockets difference.

This option negates the arduous process of finding a conventional loan. In addition, you avoid closing costs, which can be quite steep in some states (up to 5% of the sales price).

Any of these four options will lead you down the path of home ownership. Buying a home with bad credit is an attainable goal.
About the Author

The author is the owner of the information-rich website www.poorcreditgenie.com. The website offers free advice on how to rebuild credit and manage debt. The site also features numerous articles and news stories on credit report, credit cards and bankruptcy.