How To Get A Home Loan With Bad Credit
Bad credit. A phrase that feels like a four-lettered curse word when used to personally describe our financial status. A late bill here and there. An accidentally missed payment one month that goes unnoticed. A few life situations that lead to overextending ourselves. A job situation that doesn’t quite go as planned. So, one has to wonder what strategies exist on how to get a home loan with bad credit when I have all of these negative hits to my history.
These situations are becoming more and more common as our economy shifts between vulnerability and stability, and these two words – bad credit – are becoming something of a Public Enemy #1.
The reality is that our current national average credit score is below 700, which means a large group of us don’t have what’s considered to be the desired prime credit.
However, bad credit doesn’t have to be the final ax that dictates whether we can proceed in life, or not.
In fact, when it comes to purchasing a new home, there are definitely some extremely feasible and financially viable options for how to get a home loan with bad credit.
Now, let’s take a look at some of these tips and tricks to help you track down your next Home Sweet Home!
This is it. You’re ready to track the perfect home for yourself and/or your family. You’re actively cruising through every home buying app, searching for your new home wish list, and you even have a few fabulous homes saved to your profile.
The only obstacle that dances around in the back of your mind involves those two ugly words – bad credit.
So, let’s take a look at some easy steps that will help you figure out how to get a home loan with bad credit.
Eliminate the enemies of bad credit
There are a handful of things that we need to evaluate in our spending habits when thinking about buying a home.
These are issues that contribute to our overall credit, and usually, reasons why we may get denied for a mortgage the first time around.
In fact, eliminating any and/or all of these enemies from our financial situation will greatly improve our chances of scoring that home loan.
- Missed credit card payment OR being over your credit card limit
- Stopped payments on an existing loan (i.e. car, home, home equity line of credit, etc)
- Unpaid taxes
- Unpaid legal fees (i.e. missed child support payments, other court/legal fees)
- Collection agencies tracking down cash that you owe
Furthermore, if any of these situations apply to you – start an actionable plan to eliminate them.
They’re bringing you down…literally!
Build your credit
This sounds like a really long step when you are looking for options of how to get a home loan with bad credit, but truly, it’s not as time-consuming as you may think.
The world of finance has created some pretty stellar options to quickly build your credit, and in the case of trying to secure a new home loan, these could be extremely helpful options to get you moved into your new residence ASAP!
- Make every payment on any current or outstanding loans/bills
- Try a credit builder loan
- Dispute any flaws on your credit report
- Consider a debt consolidation loan (only after very close evaluation of the company and the terms)
- Keep accounts open that are totally paid off
- Don’t open any NEW accounts
- Consider paying bills every two weeks
- Negotiate payments with creditors
- Only use what you can pay back
Incorporating one or more of these options can, potentially, expedite your credit score from low to home loan ‘go’ in just a few weeks or months.
Availability of alternative loan types when you have bad credit
In the past, there have always been three main home loan types: Fixed, Arm, and Balloon.
Most of all, these are fantastic options if you have stellar credit, but for the rest of us – let’s take a look at some more feasible, alternative loans that can answer our request for how to get a home loan with bad credit.
- No credit score required; major lenders usually looking for about a 580 FICO score
- Down payment of about 3.5%
- Loan limits based on area of residence
Good Neighbor Next Door
- Available to teachers (preK-12), firefighters, EMT’s, and law enforcement officers
- Homes are available in specific areas of revitalization, listed specifically for this program
- Must live in residence for a minimum of 36 months
- Credit scores as low as 620 considered
- Down payment of only 3%
- Option: can be paid by a 3rd party blood or marriage-related relative
- The property must be a single-family, co-op, PUD, or condo
- At least one buyer has not owned a home in 3 years
- Loan amount at or below $424,100
- Credit scores of 620 or higher are streamlined for approval; lower or no credit scores must meet more specific underwriting standards
- Available for homes in rural areas
- Loan limit based on location
- Monthly payment minimum qualifications
- No down payment required
- No mortgage insurance payment required
- Available to all active, non-active, honorably discharged military member, or surviving spouses
Gone are the days that only the A+ credit scorers can purchase homes. As a result, for those of us that may have run into some financial hurdles, missed a few payments, or just dealt with the reality of life getting in the way…
…all is not lost when trying to figure out how to get a home loan with bad credit.
In fact, just a few financial housekeeping strategies and remedies can help us rebuild our credit enough to be considered for one of the traditional types of home loans.
Furthermore, If we don’t quite fit the expectations and stringent requirements for those traditional types of loans – we have some quality backup options.
Also, the desire to make an offer on your perfect home is never outside the scope of reality.
A few simple tips and tricks can ensure that we figure out the perfect option for how to get a home loan with bad credit.
Finally, focus on the end goal of moving into your perfect home and remember to make wise credit boosting decisions while avoiding the biggest money mistakes.
So, let’s close on that home!
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