Buying a house is most likely one of the biggest investments you’ll ever make. For this reason, it’s important to take the buying process seriously. There are many things to consider when selecting a house and a mortgage.
If you struggle with poor credit, then you might be worried that you’ll have a difficult time buying a house. Although there is truth to this statement, it’s still possible to buy a house with bad credit. Sure, you’ll have to jump through a few more hoops and prepare a bit more for the home buying process, but it’s still possible.
In the guide below, you’ll learn how to buy a home with poor credit. Continue reading below for several steps to take.
Pull Your Credit Report
To start, you want to pull your credit report. By pulling your credit report, you’ll be able to see exactly where your credit stands. This can give you a good idea of what to expect when applying for loans.
Your credit report will also tell you where you’re struggling. Use this information to then start paying off debt. Pay off the high-interest debt first or any debt that’s taking the biggest toll on your score.
Give yourself a few months to do this and your credit score should increase. If you have the time to do this before buying a house, then do so. The higher your credit score if when it comes time to apply for a loan, the easier time you’ll have qualifying for one.
Prepare For a High-Interest Rate
It’s also important that you prepare for a high-interest rate. People with good credit are offered mortgages with low-interest rates while those with bad credit are offered mortgages with higher interest rates. The reason for it is that someone with bad credit is seen as less reliable to pay back a mortgage in full.
If you are able to secure a mortgage, then don’t be surprised if the interest rate is a bit high. This should be expected and prepared for. If this causes concern, however, don’t worry.
As the years pass by and you improve your credit score, you can refinance your mortgage and lower your interest rate.
Figure Out a Realistic Budget
If you have bad credit, then you’re most likely already in debt. This doesn’t mean you can’t or shouldn’t buy a house, but it does mean you want to make a smart purchase. The best way to buy smart is to figure out a realistic budget before you even begin house shopping.
Sit down and compare your current expenses to your income. How much money are you left with each month? How much money are you able to spend on a mortgage while still paying off your current debt?
You don’t want your mortgage and home utilities to clear out your bank account every month. You need to have money left over to continue paying off that debt, so keep this in mind when figuring out a home budget.
Start Saving For a Down Payment
As someone looking to buy a house with bad credit, it’s beneficial to have a large down payment in hand. The larger the down payment, the smaller the mortgage. If you’re able to put down a big chunk of money on a house, then more lenders will be willing to work with you.
If you haven’t already started saving, then do so now. Save up as much money as possible before buying a home so you have a bigger down payment than needed. This is a great way for someone with poor credit to secure a home loan.
Become Familiar With Resources
It’s also ideal that you know your resources. There are many resources available to those who want to buy a home but don’t have an ideal credit score. For example, there are some companies that don’t require credit score checks before financing a home.
Click here for more information about these services. There are also programs available to first-time homebuyers or those with low income. Always make sure you do your research before buying.
Different states offer different resources and help to those in need, so it’s important to know what’s available to you before you buy.
Recruit a Co-Signer
Last, it’s always an option to find a co-signer. If you know someone who does have great credit and trusts you enough to co-sign for you, then be sure to recruit them now. A co-signer is someone who agrees to take on the financial responsibility of the loan if you’re unable to pay it.
For this reason, being a co-signer is a huge decision to make. If you’re able to find someone to co-sign for you, then be sure to appreciate this person. You may also be able to apply for a longer-term loan with the help of a co-signer, which can reduce your monthly payments.
Do keep in mind, however, that not all loans will accept co-signers, so you might have to do your homework first.
You Can Buy a House With Bad Credit Today
Do you struggle with bad credit? Are you worried your bad credit will prevent you from buying a house? There’s no better time than now to stop all that worrying!
You can buy a house with bad credit today when you follow all of the helpful tips and steps listed in this guide above. Then, when you’re interested in topics similar to this one, be sure to check back here.