How to buy a house if you have a bad credit score!
Updated: Jan 2, 2022
Have you ever been rejected for a loan when trying to buy a house? Did you know that having a bad credit score is one of the most common reasons? Don't worry, though - there are still ways to buy a house if your credit score isn't great. This blog post will discuss some of those ways and help make the process easier for you. So, read on to find out how to get the home you've always wanted, even if your credit score is low.
Option 1: Buy a house with a co-borrower.
This is an excellent option if you're buying a house with someone who has a perfect or even "good" credit score; you may be able to enter into a loan with them. This could be a spouse, parent, or friend. It just depends on your relationship with this person. If the lender agrees, this person can be added to your loan as a co-borrower. This means their credit history is taken into account alongside yours, which increases the likelihood of a successful application. This is usually possible even if only one person has good credit - it's just that having two people with excellent scores increases your chances of getting approved for a loan at a better rate.
Option 2: Buy a house with a larger down payment.
If you don't have a great credit score and can't get help from friends or family members, how about coming up with a more significant down payment? Not all lenders are created equal. If you can pay a higher percentage of the cost for the home in cash upfront, the lender might consider you less risky.
Option 3: Shop around.
As I said above, not all lenders are the same, and not all loans apply to every person. A local bank is going to be different from a national one. A credit union is different from a bank. A mortgage shop is different from a credit union. All of these will have different options for loans and credit score requirements. So shop around to see what lender might be more open to a lower credit score. Sometimes you can justify why your credit score is low. Maybe you're in repayment for specific debts. A lender might be receptive to this. But mainly, what any bank is looking for is Debt to Income levels of the individual. So be sure that your current debt doesn't outweigh your income. Start creating a financial program for yourself. Or check out apps like Mint that pull all of your financial information into one place. You need to get your house in order (no pun intended) before buying a house.
Option 4: Work on your credit score.
I know, I know, you came here to see what tricks there are associated with purchasing a home with a low credit score. But let's be honest, if you have bad credit, the best things you can do is work on that credit. And it might not be as had as you think.
Here are a few quick things you can do.
1. Pay off any current debt-- especially anything that is adversely affecting your credit. Not sure what that is? Do a credit history search. This is a quick way to establish what some of your debts might be. Credit scores can rebound pretty quickly (within 6-12 months). Cant pay off your debts? Ask for a repayment plan. It's all about getting things taken care of.
2. Us a credit card for gas and pay it off every month. You need to be able to establish a history of good credit. This means consistent payments. You need to look at yourself like a bank does, which is an investment. This means you need to pay for things on time.
3. Don't miss payments. Again, it seems trivial, but missing payments is a huge issue for most people with bad credit. Don't buy a lot of things on credit. Manage your finances and be frugal. You'll likely need to do this anyway in order to get your down payment together.
In conclusion, you don't need a perfect credit score to buy a home. Most lenders are receptive to low credit scores as long as they know that you're committed to loan repayment. So, don't give up hope if your credit score isn't excellent - and always check that the loan you're applying for is right for your needs and financial situation. Thank you so much for reading, and I hope you enjoyed this blog post. Please share it with your friends on social media. So we can help them too, thanks!
Sincerely, Black Phoenix Group