Buying A Home With Poor Credit
Because most of us dream for a home to call our own. A safe haven we’ve built to shelter us in bad times. The thought of being able to paint our rooms the color we’ve chosen, or being able to decorate to our own standards, host a housewarming party with friends and family, or even planting that veggie garden you’ve been wanting; with renting, it somehow isn’t the same.
Unfortunately, buying a home with poor credit is one huge obstacle for many of us. This three number score and your credit report is something that can single handedly hold you back from being granted a home loan. Why? Credit reports show our written history as payers of debt. The lower your credit score, the lower your chances are at securing a home loan, which is why it’s important to know where you are with your credit report, the changes you can make to raise it, and the options you have to move forward.
There is no instant way to raise your credit score, but it is most definitely worth taking the time to do so. There are many options available to you through mortgage offices now which can make it easier to obtain a loan, even with a not-so-hot credit score. So while working towards bringing up your credit score, here are some options that can assist you to secure a home loan.
1. Save a larger down payment – For those with lower credit scores, saving a larger down payment is necessary. A larger down payment is a signal to lender that despite your credit history, you are increasing the equity of the home upfront. The more financially invested you are in the home, the more likely you are not to default, which proposes less risk to the lender. A larger down payment may also assist in compensating for a lower credit score.
2. Find a Cosigner – Finding a cosigner can greatly increase your chances of securing a home loan with a low credit score. Essentially, a cosigner is a co-borrower of the home loan, meaning if you default on the loan the responsibility goes to the cosigner. The loan will not only appear on your credit report, but on the cosigners as well.
3. Continue to Work Towards Raising Your Credit Score – In a few months to a years time, you can substantially clean up your credit report and raise your score. If you have any judgments or collections against you, pay them off as quickly as possible. Past due accounts need to be brought up to date. Do NOT open any new lines of credit, or close out any existing lines you have, that will use a higher percentage of your overall credit limit. A lender can suggest which actions need to be completed and in what order, depending on your situation.
Less than perfect credit does not mean you will never own a home. Put in the work and stick to it. Owning a home is a dream worth achieving.