You Can Buy a Home With Bad Credit

Bad credit can be disheartening, and many believe that bad credit can disqualify you from buying a house. While it can be challenging, it is not impossible to purchase a home with poor credit. Below, I have compiled tips on steps you can take to increase your chances of buying a home. If you’re not in the position to buy today, preparing for what could be available in the future is a strategy that will pay off in the long run.

First, check your credit score.

Checking your credit score is a straightforward process. Each of the nationwide credit reporting companies —Equifax, Experian, and TransUnion —is required to provide you with a free copy of your credit report upon request, once every 12 months.

Additionally, review your credit report for errors. If you find an error, the best way to attempt a correction is through a dispute letter. Dispute letters enable you to request a correction from the reporting agency formally. Although it may take some time to remove the errors, cleaning up these mistakes can have a direct, as well as favorable, effect on your credit score, helping you secure lower interest rates and better terms.

Larger Down Payment

Obtaining down payment assistance can be challenging with a poor credit score. You can increase your chances of pre-approval by demonstrating that you have 10% down to put on your home. That 10% is beneficial if your credit score is sub-550. Above 550, you can land an FHA loan with only 3.5% in equity.

Need help saving for a down payment? Here are some tips for conquering saving for a down payment:

• Find out where your money goes and make adjustments on what are “needs” versus “wants.”
• Get specific about how much you need to save, so you have a visible goal to shoot for.
• Set up a separate savings account, so your down payment is out of sight and out of mind.
• Pretend you already have a house payment by paying that amount to yourself each month.

Make Moves to Rebuild Your Credit

You don’t have to be perfect to improve your access to better mortgage terms. First, pay down your credit card balances. Then identify any outstanding debts or collections that you can manage to get cleared through full payment or a negotiated settlement. If you can push your rating above 620, you’ll not only get closer to better terms, but generally, you’ll experience less scrutiny during the approval process. Focus on doing what you can to bring your debt-to-income ratio below 45%.

Don’t Force It

Suppose you’ve experienced a bankruptcy, foreclosure, or short sale scenario. In that case, it may not be possible for you to secure a mortgage for at least three years (sometimes two, depending on the situation). Use this time to work on the tips above!

If you’d like to start searching for your next home, please give me a call. Trent Beaver (928) 916-1921 – I will put my years of experience to work for you!