 TITLE: How to Buy a Foreclosure if You Have Bad Credit CONTENT: Buying a Foreclosed Home With Bad Credit\n----------------------------------------\nEven under the best of circumstances, the risk inherent in foreclosed properties can make it difficult to buy one with traditional mortgage financing. It can be even harder if your credit is less than ideal, but that doesn't mean it isn't worth a try.\nIf you're a first-time homebuyer planning to use your purchase as your primary residence and your credit score is 500 or better, it's worth investigating a Federal Housing Administration mortgage, better known as an FHA loan. These loans offer generous borrowing terms but also come with fairly strict qualification requirements: Some foreclosed properties are ineligible for purchase with FHA loans, and you'll need a down payment of at least 20% of the property's appraised value if your credit score ranges between 500 and 579. If your credit score is 580 or better, a 10% down payment is required.\nIf mortgage financing proves unfeasible, there are a couple alternatives to consider:\n*   **Cash payment**: Paying cash is the preferred method of many real estate investors, so lenders are comfortable with cash purchases. In markets where foreclosure sales are soft, lenders may even negotiate a lower sale price in exchange for a cash sale. Of course, access to sufficient cash to buy even a bargain-priced foreclosed home outright is a tall order for many potential buyers.\n*   **Hard-cash lenders**: If you own real estate or other property worth at least as much as the purchase price on your chosen foreclosure, a hard-cash loan may be an option. These loans, which use your property as collateral, are highly risky: They typically come with high interest rates (25% is not unusual) and short repayment periods (five years or less). Not only that, failure to pay off a hard-cash loan could result in the loss of the property used to secure it.  \n    Hard-cash lenders typically do not check credit scores, however, and their approval process is often quicker than that of a mortgage loan. So if you're buying a foreclosure as an investment and are confident you can get it to generate sufficient cash flow in time to cover the loan, a hard-cash loan could work for you even if your credit is in bad shape. END