Many ex-homeowners who have lost their homes to foreclosure are waiting on the sideline, pondering on when they can get another chance at homeownership. The loss of their homes may have been due to some hardship that is now behind them, or is a result of a strategic default that they have taken because of a bad mortgage and/or a down under situation. But whatever their reasons are for losing their homes, they still want to chase (again) the American dream.

Those who have a foreclosure ding on their credit will have to wait years before they can get a loan with good rates. They’re finding that the brouhaha about historically low interest rates apply only to those with excellent credit.

Former homeowners who have their jobs back have their confidence coming back and they’ve started to dream again…for a home. So what do they need to do to become homeowners again?

Rebuilding credit is a slow, but sure way to get into homeownership again. The down side is you could miss the boat on low priced homes that are continuing to flood the market.

Buying cash is a no brainer, if you do have the money. With the home prices still below where they were five years ago, you can potentially purchase a condo in the Bay Area for less than $100,000. But if you just came out of a hardship, it is not likely that you have this kind of money, unless you get a little help from family.

Buying a home using someone else’s credit is feasible especially if the right one comes along, meaning someone with a good job, good credit, but no down payment.  Sometimes a relative or friend will agree to getting the mortgage, if the down payment is answered for by the parents or the sister. It becomes a little sticky when a non-relative gets involved, but I’ve seen it happen. Everybody is on title, yet only one is on the loan.

I have seen numerous variations to the payment arrangements and occupancy terms.  Sometimes, the borrower does nothing from then on; the ex-homeowner takes care of the mortgage payments. I’ve seen it where the borrower contributes an equitable share of the mortgage payment.

There are obviously risks involved in this route to homeownership. What if one wants out? What if the borrower wants to move on and is now ready to get his own home? How will you divide the equity when that time comes? Is the ex-homeowner ready to take over the full mortgage payment? Is the ex-homeowner continuing to rebuild his credit so that he can possibly get his own mortgage?

Common sense will tell you to be prepared for all possible scenarios. Consider this a last resort, not the only alternative. Importantly, consider it a joint business venture. Not a favor. Everyone has reasons for agreeing to this arrangement. It has to benefit all. And if you’re not comfortable, don’t get into it!