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Today, borrowers seeking a home mortgage through conventional banks must possess a credit rating of 750 or higher to obtain a low interest loan. In addition to excellent credit, potential homeowners must have a strong history of paying debts on time and a solid work history. Fortunately, alternative options exist for borrowers with less-than-perfect credit.

One popular home mortgage alternative is referred to as seller carry back mortgages. Using this technique, sellers act as the lender and carry all or a portion of the purchase price. Seller carry back contracts usually last between two and five years; allowing borrowers time to clear negative credit or establish credit. When the contract expires, borrowers apply for a conventional home mortgage.

Another popular option is rent-to-own properties. Buyers live in the home and pay the
homeowner rent. A portion of the rent is contributed toward the purchase price. Most sellers of rent-to-own homes require a down payment of 10- to 20-percent. Contracts last between two and three years to help buyers establish a payment history.

Buyers engaging in rent-to-own and seller carry back mortgages should have contracts
reviewed by a real estate attorney. Home mortgage contacts should include default clauses which protect all parties involved.

Monthly mortgage payments should always be made by bank checks for ease of verification. Paying with cash and money orders is strongly discouraged unless the seller is willing to provide notarized receipts which could be upheld in a court of law in the event of dispute. A lesser known option for obtaining home mortgage financing is through private lenders such as real estate investors and investment groups. This lending practice is often referred to as "hard money loans."

When borrowers do not qualify for conventional home mortgage loans, hard money loans can help them purchase the house they desire. However, hard money loans are not cheap. Interest rates typically fall between 15- and 20-percent. Down payment requirements range between 30- and 50-percent.

Private lender mortgage loans are intended to be short term; lasting no longer than two to three years. Borrowers engaging in hard money loans should strive to refinance into a conventional loan as soon as possible. Most banks will review loan applications once borrowers have established a solid track history of making consistent payments for 12 to 14 months.

The U.S. Department of Housing and Urban Development (HUD) offers a variety of homebuyer assistance programs. These loans are available to low-income buyers and individuals employed in certain professions such as police officers, firefighters and teachers.

Borrowers unable to meet conventional home mortgage loan criteria might qualify for Federal Housing Administration (FHA) loans. Buyers are required to provide proof of income, source of down payment, and provide evidence the property is worth its appraised value. FHA lending limits vary by state and buyers are required to work with an FHA-approved mortgage broker.

Individuals unable to obtain conventional or alternative financing should strive to remove negative marks from their credit and embark on a mission to improve their FICO score. Start by obtaining a copy of credit reports from the three major credit reporting bureaus of Experian, Equifax and Trans Union. Dispute any charges which have been paid in full or written off through debt settlement.

Strive to reduce credit card debt to 20-percent of the credit limit. For example, if the credit limit is $10,000 borrowers should have no more than $2000 in outstanding debt. Pay all bills on time each and every month for at least one year. Reducing outstanding debt and paying on time can raise credit scores by 100 to 300 points; allowing buyers to qualify for home mortgage loans with lower interest rates.(SimonVolkov.com)