Thursday, September 12, 2013

Buying a Home with Bad Credit


If you are considering buying a house, having good credit is extremely important. It allows you to expand your loan availability and impressive interest rates. While you can buy a home if you have bad credit, your options are more limited. But there is hope! You can help to repair your credit score and better your chances of getting a loan with decent terms.

Just a decade or so ago, potential home buyers were able to get loans more easily. Nowadays, home loans are approved on a much more constricted basis. If your credit needs some work, there are some things you can do to alleviate the skittishness that lenders have when it comes to lending you money for a home.

Consider the following suggestions when buying a home with bad credit:

Understand your credit reports and score.

Your credit score is the first thing that lending companies and mortgage firms look at when they research your credit. They usually evaluate it with a letter grade, just like in school. You can get your credit report from all major credit agencies, and you should look them over to make sure that everything is correct. If there are any errors, you can report them to get them corrected, which can actually help your score enough for you to qualify for a traditional home loan mortgage.

Apply for a subprime loan.

If you need a house right away and don’t want to get your credit score up before you buy, you may be able to get a subprime home loan. Subprime loans are loans for those with blemished credit histories. While it was easier to get a subprime loan a few years ago, they aren’t particularly popular in these economic times. These loans carry a higher rate of interest than prime loans to compensate for increased credit risk.

Shop around for flexible lenders.

There are some lenders that will be more sympathetic to your credit woes. Be sure to ask lenders whether or not your past credit blemishes may cause any problems in obtaining a loan. A mortgage broker may also be more accustomed to helping those with credit problems as well.

Save more and keep a clean credit record.

Of course, the best recommendation is to wait on a year two before buying a home and spend some time improving your credit score. If you don’t have to rush to buy a home, then why not buy some more time to clean your credit record? It may just result in a great credit score and lenders scrambling to get your business!

Keep in mind that a smart potential homeowner is always looking for ways to improve their credit score, reduce debt, and save money. When you do decide to buy, consider getting a free home value report from Neighborhood IQ to find out what your home is worth.

 

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