Ben Todd | Jun 2, 2017 | 1
How to Buy a House with Very Bad Credit
If you want to know how to buy a house with very bad credit, you need to know that is possible. However, you are going to have to work extra hard to secure a mortgage with poor credit than if you had good credit.
When you are trying to buy home with very bad credit, you are going to encounter some serious difficulties when you start to make your mortgage applications. Traditional lenders are very wary of giving loans to people with poor credit. From a bank’s standpoint, you represent much higher risk if you have bad credit history.
But, there are still ways to get a mortgage with bad credit. Probably the first and best way is to improve your credit score. Yes, this is not what most people want to hear when they are trying to get a bad credit mortgage, but it’s a valid strategy that everyone should consider important.
If you improve your credit, you will open up a whole array of financial options. For people with good credit, securing any sort of loan is much easier and you can expect to pay much lower interest rates.
The first thing you should do should you wish to apply for a home mortgage with very bad credit is to order your credit reports from all three major credit agencies. Once you get the report, you can go through it to make sure there are no errors on the report. If you do find such errors, you can report to the agency that publishes the report for an investigation. Getting rid of credit errors can increase your credit score in as fast of 30 days. For some people, this may be enough to land a traditional loan.
Remember, the best way how to buy a house with very bad credit is to fix your credit in the first place. But for those who cannot wait, there are certainly faster options out there for you to pursue.
If this is not enough to qualify for a bad credit home mortgage loan, you can seek out other options then. Now, traditional lender is usually pretty unwilling to give people with bad credit a loan, but there are other vendors out there that will. These are online bad credit mortgage lenders. You can find many of these lenders for people with bad credit if you search around online. These lenders usually vary in the interest rates that they offer and the loan fees they charge, so it’s in your interest to do a bit of comparison shopping.
I suggest you make applications to several of these online loan companies. An application does not mean you have to accept the loan offer. You can easily fill out the applications online, and the response is pretty quick. If you have bad credit but you have a good income, you might just be able to land a bad credit loan from an online lender.
Now, if you want to go through more traditional channels like a bank or credit union, you can think about getting a secured mortgage loan. Secured loans require some sort of collateral on your part. If you have another house, expensive cars, etc, you can put these assets up against the mortgage loan. However, usually people applying for their first mortgage won’t have this.
You can get a secured loan with a sizable down payment on the house however. Down payments are usually 5% of the house value. If you can show a bank or credit union that you have a significant down payment, then they may offer you a loan.
How to buy a home with very bad credit depends on what route you want to take. You can try and improve your credit to secure a better loan in the future, or you can try and get a quick bad credit mortgage through an online vendor. If you have a significant down payment, you may able to secure home financing though a bank, if you can convince them you are worthy of a loan. The bottom line is that you need to pursue all your options if you want to get a home with very bad credit history. It can be done.