How to Buy a Home with Bad Credit

If you have bad credit it might seem impossible to get a loan and buy a home, but with the right help, you can take control of your finances.

Here are some examples of steps you can take to buy a home:

Review your credit report and check for any discrepancies as they might contain errors. You can get a report from Equifax, Experian, and TransUnion. You can request a copy for free once a year.

Be willing to pay higher interest. Lenders charge borrowers higher rates as a way to protect themselves. Your monthly payments will be higher, meaning a much larger sum of money will be paid to interest. Improving your credit score can save you thousands.

Avoid adjustable-rate interest mortgages. This is a trap because low-interest rates are fixed for a given number of years but when it ends, the mortgage rate will fluctuate based on the current rates, and that could mean a higher rate than before.

Avoid predatory lenders. Make sure you work with a mortgage company or lender that is established and legitimate. If there is high pressure to take out a loan, balloon payments, penalties for early pay-offs, or sketchy unauthorized refinancing, those are red flags and should be avoided at all costs.

Providing a large down payment. If you can come up with a larger down payment, lenders might be willing to take a chance. If you’re putting at least 20 percent down you will increase your odds of being approved. Be honest with yourself and make sure you don’t over-extend yourself when buying a house, remember that homeownership comes with many hidden costs.

There are also several types of home loans for those with bad credit including:

Conventional loans: You will usually need a 660 credit score or better to qualify for a conventional loan.

FHA loans: Backed by the Federal Housing Administration. If you’re a first-time buyer or haven’t purchased a home in 3 years, you could qualify for this loan.

USDA loans: Loan backed by the U.S. Department of Agriculture.

If you are struggling with your credit, reach out to us, we can improve your credit score in a heartbeat.