You might be asking, “Can I get a mortgage with bad credit?” The answer is yes – sort of. It will depend on how bad your credit really is. But the good news is, while it might take some time to get a bad credit mortgage, you can eventually qualify for a mortgage with bad credit.
Buying a home is one of the biggest purchases a family or individual can make. Just a few short years ago, buying a home was within reach of just about anyone – even those without a steady job, or a decent down payment. Today, the banks have learned their lesson and are not approving bad credit mortgage applications the way they might have previously. When you are really tired of renting though, you probably want to find any way you can to buy a home of your own.
For a bad credit mortgage loan, there are some lenders who will lend if your credit score is above 600, but the interest rate you pay will be higher, and the down payment you’re expected to make will also be higher, somewhere around 10% of your home purchase price. There are more hoops you will have to jump through, and there might be additional fees and costs that get added onto your loan. Also beware of a prepayment clause, which means you will pay another fee if you try to pay off your loan within the first year or two, such as if you decide to sell your home.
To buy a home with bad credit, you will probably have to wait until you establish at least a couple years of decent credit despite having a bad credit history. Try to set up a credit repair plan so you can rebuild your credit, and get started with an improved credit report. Raising your credit score can’t hurt, even if you still won’t be in the 700′s. But you will have to be patient.
Also make sure you can actually afford the monthly payment. Lenders will be more careful about what other debt you are carrying, how much money you earn at your job, and how long you’ve been there. It’s a good idea to test yourself and your budget to see if you can pay the monthly payments. For example if you are renting today, try to put aside extra each month as though you had a full blown mortgage to pay. If you can pay off some other debts like car loans, and reduce your monthly debt burden, your mortgage will be that much more affordable.
It could take a couple years for you to be rebuilding credit and saving up down payment money so you can get a house with bad credit. If you have a bankruptcy in your past, some lenders expect you to wait at least two years and up to four. the same goes for a previous home foreclosure, which many Americans are going through right now. Buying a house after bankruptcy, or buying a house after foreclosure, means you have to meet with lenders and find out their requirements, then plan how you are going to rebuild your finances to meet these. Building a budget to better manage your money is a good idea too, and will help even after you are in your new home.
The best place to go for help getting a mortgage with bad credit is to your real estate agent. Most real estate agents, if they are successful, long time professionals, will have lenders they work with who can handle all kinds of situations. Without a good lender, a real estate agent is not going to sell many houses. When it comes to poor credit loans, finding a mortgage broker who is a specialist in all types of loans is going to be the right person to help you. Generally, your local bank will have more strict lending standards, and will not lend to individuals with any kind of bad credit history. Small banks also have trouble adding more risky loans to their portfolio – while a large bank or broker can find you a loan since th risk of a mortgage for people with bad credit is evened out among all the other loans.
If you’ve spent time rebuilding credit and developing a good track record the past few years, working with a lender or broker can help you to get pre approved for a mortgage with bad credit.
It’s important to follow good credit repair tips over time, so that your credit score is improved, and your financial habits as well. If you expect to get a mortgage loan without having changed any of the bad money habits that got you in a place of having poor credit, then you wont’ find any lenders will to give you a loan for a home. But if you can s how them that you’re working hard to change your habits, build a successful financial foundation, and you have the credit score and down payment, you are sure to find get an approved mortgage with bad credit one way or another.
Don’t worry that you will never own a home. While you might not qualify yet, and while bad credit mortgage products might not be as easy to obtain as they were in the past, if you work at cleaning up your credit you will qualify. Have patience and do what it takes to rebuild your credit and you will eventually get a house with bad credit.
