Obviously, you won’t be able to walk into your local mortgage company office and get a loan unless your credit score is exceptional and your verifiable income shows that you can comfortably make the payments.

Gone are the days of “sub-prime” mortgages, and gone are the days of “stated income” for borrowers with high credit scores. Gone are the offers of “zero down” loans and creative financing options that allowed sellers to carry back a note for part of your down payment.

Lenders are being darned careful right now.

So what can you do if you want to begin building equity in a home – but your credit score is marginal and available funds for a down payment are scarce?

You can look for lease to own properties, and seller-financed homes.

Borrowers aren’t the only ones affected by this crisis – homeowners who need to sell are also in a bind, because the pool of buyers who will qualify for loans is getting smaller and smaller as lenders tighten their requirements.

Thus, those who can will begin entertaining the idea of seller financing and lease to own arrangements.

This could be good news for prospective homeowners, but it could also mean that home ownership will cost more. Traditionally, seller financing comes with a higher interest rate than those we’ve seen in the past few years. That means you’ll get less house for the same payment. Also, wary sellers might want a larger down payment than you are able to make.

These sellers will also want to see your credit report, but will likely be a little more flexible than mortgage lenders.

That leaves “rent to own” or “lease-purchase” arrangements. Under these situations, you won’t be on title, so won’t get the tax benefits of home ownership until the purchase is completed. Still, you’ll be locked into a purchase price, and if inflation continues, that could be a good thing.

Also, these sellers won’t be as fussy about your credit score, because they know that if you default, they’ll get the house back immediately rather than having to go through the long and expensive process of foreclosure.

But do be careful. Many “rent to own” properties are owned by companies seeking to take advantage of the current crisis, and their contracts are strict. For instance, they may require you to get a loan and cash them out within a set time frame. If you can’t do it, you’re out of the house and all payments made toward the down payment are kept as “liquidated damages.”

Making regular on-time payments to these companies will help raise your credit score, and the extra you pay will force you to build a down payment, so a lease purchase could be to your benefit.

Just be sure to read the fine print – all of the fine print.

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If you’ve ever applied for a mortgage loan, and if your loan officer was on the ball, you were told not to go shopping for a car or furniture for that new house. You were told that looking is fine, but do not give a sales person your Social Security number for any reason.

You were warned that inquiries on your credit report would lower your score, and could even prevent you from getting your mortgage loan.

This is true – and borrowers who are barely squeaking by with a credit score at the lower levels of acceptable can cause themselves to lose out on the mortgage.

At the same time, you should have been told not to withdraw funds from your checking or savings accounts to make a large purchase in cash, because your mortgage lender will check your balances to make sure that you have the required balance in the bank to pay your down payment and have a few months’ payments left over.

These warnings have led many to believe that any and all inquiries will lower your credit score, and that is not true. “Soft” inquiries will not harm you, because they don’t indicate that you’re trying to obtain credit.

These would be inquiries you make yourself, inquiries from potential employers, and inquiries from companies who routinely check credit as a preliminary step before sending out letters soliciting your business. Likewise, an inquiry from a creditor with whom you’re already doing business will not affect you.

These may or may not show up on your report, but don’t worry about them.

Checking your own score periodically is a very good idea – in fact, Fair Isaac, the inventor of the FICO score, recommends that you do so. Checking will allow you to catch errors early on, and will alert you to signs of identity theft – one of which is inquiries from creditors you don’t recognize in cities where you don’t live.

If you live in the Midwest and you see an inquiry from a car dealer in Seattle, it’s time to find out why. “You” may now live in Seattle and not even know it.

When you see such an inquiry, or see something strange – such as an incorrect address for you or your spouse – don’t dismiss it as a mistake. Contact the credit bureau immediately and find out more. Let them know that you may be a victim of identity theft and need the information.

Why not get a copy of your credit report today – right here at CreditScoreQuick.com.

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