How to Buy a Home With Bad Credit

Buying a home is a huge step forward for many consumers. The only problem is that if you have bad credit, getting a mortgage can seem like a distant fantasy instead of a realistic goal.

Is it impossible to find a good mortgage offer with poor credit? We don’t think so, and we’ve gathered a few tips that might make your journey to home ownership easier.

First-time home buyers click here for more information on FHA Loans

Improving Your Credit

Never just accept the fact that you have bad credit. Your consumer credit history isn’t set in stone. Despite what some lenders might say, you have the power to change it at any time.

The first step is understanding why your credit is bad. Although the calculations that go into your FICO score are complicated, getting your credit reports will shed light on things.

Some entries, like overdue bills, unpaid loans and defaults, can significantly lower your score. Other important factors include the amount of income you have compared to the level of debt you owe and the number of credit card accounts you have open.

If you want a mortgage loan, it pays to know what’s bringing your credit down so that you can fix it. If looking at your report doesn’t make the problem obvious, don’t be afraid to talk to a credit counselor.

Reversing the Trend

Once you’re on the path toward bad credit, getting things back under control can take some time. Patience is vital, and so is facing your past.

Steps such as reducing your spending, saving money and paying off delinquent bills are easier said than done, but they’re essential. Whether you’ve been avoiding collectors or failing to pay legal judgments, prospective lenders will know.

Although some things, like filing for bankruptcy, are unavoidable, you should also understand that these kinds of entries stay on your report for up to seven years. You might benefit from waiting to seek a bad credit home loan.

Adjust Your Borrowing Strategy

Armed with a greater knowledge of your credit standing, you should think carefully about the kinds of mortgage offers you pursue. For instance, a lender who rejects you might be willing to approve you for a smaller loan or reconsider if you provide documents like your recent pay stubs and savings account balances.

Also, understand that home loans aren’t just about your financial status. The property that you want to buy makes a big difference. If you’re trying to purchase a home that isn’t really a good investment, your lender might be less willing to help.

Trying to get a bad credit mortgage loan can be a stressful ordeal without the right guidance. 

If you’re a first time homeowner, find out if you qualify for an FHA loan by clicking here.