It's true. In a perfect world, you would have at least 20% of the purchase price to put down on your dream home. And your credit would be in pristine condition. However, for most of us, that just isn't the case. The truth is, you do not need perfect credit to buy your perfect home. "But how can that be, Matt?" you ask. Let me tell you.
You Do Not Need Perfect Credit to Buy Your Perfect Home
FHA Loans are popular with first-time home buyers. That is because you do not need perfect credit to buy your perfect home through them. They only require a 3.5% down payment. Is your credit score less than stellar? They'll accept Buyers with a 580 credit score provided they have the 3.5% down payment saved up. If your score is even lower, you still might have a shot at an FHA. They will consider applicants with scores as low as 500. However, you will need a higher down payment to back it up (typically, around 10%).
For many Buyers, the down payment can be the hardest part. If that is the situation you find yourself in, you may want to consider a rent-to-own option. This is a contract between you and the property owner. The renter agrees to pay a higher than normal rent to the homeowner each month. The extra money will then be credited towards the renter's down payment when the contract is over. The two parties agree on what the purchase price will be at the end of the contract, which typically lasts one to three years.
Another way that you do not need perfect credit to buy your perfect home is when you can utilize seller financing. Some Sellers aren't too keen on a rent-to-own scenario. However, if their mortgage is paid off or if the Buyer's down payment would be enough to pay it off, the Buyer would pay the Seller every month instead of a mortgage company. This could be done until you get your credit in a good enough position to procure a traditional loan.
As you can see, you do not need perfect credit to buy your perfect home. You do have some options. Talk to your Bay Area real estate professional to learn what you can do to purchase your next home.