Renting is sometimes a good temporary option, but when it comes to the long-term owning your home is the preferred way to go. Sometimes things like bad credit prevent you from considering this option. Whether you’ve been too embarrassed to ask about it, doubted you could do it, or just didn’t think it was possible you can own a home with bad credit. There are, obviously, limitations, such as how bad the credit is, your source of income, lenders in your area, and so on. However, owning a home could be in your future. Here are five ways how!
Bad Credit Mortgage
Although with bad credit you will probably need a bigger down payment than someone with good credit, it’s still not impossible to get a mortgage. Even if you have filed for bankruptcy, it is not impossible to get a mortgage. There are many options, lenders, and opportunities you can explore as you are searching for a way to buy a home. If you are interested in a bad credit mortgage and how they work, check out CLS Money. They answer a lot of common questions about bad credit mortgages and can give a lot of peace of mind on this subject.
Check Your Credit Report
You can go to Annualcreditreport.com to get a free copy of your credit report from each reporting credit company. This will not only help you be able to understand your credit, but you can also check for any errors that may be on your credit report. With this, you can dispute claims to your credit companies. This could easily boost your credit, making your home search a much easier process. It may not give you excellent credit, but any amount counts with your credit!
FHA Loans
FHA, or Federal Housing Administration, loans are normally the way to go if possible. They can sometimes approve people who are searching for a home with a credit score of 500. There are some requirements that should be looked into first and foremost. However, this option only has a down payment requirement of 3.5% of the cost with a score of 580. This could be fantastic for many people, but you also have to keep in mind that they can require higher than a 500 credit score. There are many things you need to know before applying for this loan, so talking to a HUD-approved housing counselor is recommended.
Be Ready for a Larger Down Payment
Another way to buy a home is to be ready to spend on a larger down payment. Having this money ready to go can persuade lenders to take a chance with you since you are ready with the money. Down payments often are the make-or-break factor for those with bad credit. It basically just tells your lender that you are more invested in this loan by already paying a good chunk of it. Although a person with good credit can get approved with a 3% or less down payment, someone with bad credit should be ready and willing to lay down at least 20%.
Rebuild Your Credit
If none of the options above seem to be in your favor, you may have to just rebuild your credit. This may look different for each individual. Some may need to file for bankruptcy, others may need to look for errors on their credit report. It’s even possible to have to go on a tight budget to make sure you are paying back the money you owe more quickly.
While only you know your financial situation, it also may be smart to talk to a financial advisor to get more input from a professional. Overall, if you owe a certain percentage compared to how much you make, you should probably file for bankruptcy. Accidents happen, but doing it sooner than later can help you get back on track faster.
There are the five best ways to buy a home with bad credit. Nobody knows your situation better than you, so these are completely up to you or a financial professional to figure out and do what you need to do. These five tips should help you get out of that apartment and getting the keys to your new home faster!
