Monday, February 24, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems
If your financial situation is less than perfect, buying a house may be a bit more challenging than it would be for others. But it is possible. Here are five things a prospective home buyer can do toward getting a home, even with fair or bad credit .
1. Improve your credit.
It sounds obvious, but it can be done. Lenders judge a borrower's likelihood to pay back a loan based on their credit score. A credit score range between 669-580 ranks your credit as “fair,” and is considered a higher risk for a mortgage lender. Lenders view a score of 579 or less to be “bad credit.” A low credit score means you’re a higher risk for a lender.
It is possible to improve your credit score if it's below 580, and it may take some time. You can:
Improve your payment history.
Having a history of regular on-time payments are a critical part of good credit. Having a plan to regularly make payments will go a long way to improving your numbers.
Pay down debt.
Lenders look at your amount of debt and create a debt-to-income ratio - how much you earn and how much you currently owe.
If you are maxed out, getting more debt will be very difficult. Repay as much debt as you can, and over time, your credit score will rise.
2. Get credit repair help.
Consider getting a credit repair service to help get you out of debt and shore up your credit rating.
3. Find lenders with programs specifically for buyers with poor credit.
FHA Loan Insurance
The Federal Housing Administration (FHA) offers loans specifically for buyers with bad credit. Qualifying buyers can get loans with low down payments, some as low as 3.5% of the loan. Borrowers can also avoid the requirement to verify two years of employment. But, and there is a but, you will likely pay a higher interest rate on your home loan.
4. VA Loans
Military veterans with a credit score of at least 620 have access to Veteran’s Administration (VA) loans. Veterans qualifying for a VA loan will be able to buy a house with no down payment, no private mortgage insurance and lower interest rates.
5. USDA loans
Available for home buyers who are lower-income and considering buying in rural areas. The United States Department of Agriculture (USDA) also requires a credit score of 620, but there are additional program benefits similar to VA loans.
Global Property Systems says:
The sooner you start working on shoring up your credit rating and doing what you need to do to qualify for a mortgage, the sooner you can own a home of your own.
If you're considering buying or selling a property locally or globally, or need more information, CLICK HERE.