Are your bad credit and low credit scores preventing you from buying the home of your dreams?
If so, you know how important good credit is to pursuing your life dreams.
You’re tired of throwing your money away on rent when you could be investing it into a home of your own. But your credit stands in your way…
You’d be forgiven for assuming that there’s nothing you can do. Luckily, that’s not the case!
All you need is to understand some homebuying tips and options. Then, despite your poor credit, you may find yourself sitting pretty in your new home.
Take a Look at Your Options
Despite your credit scores, your situation may not be as impossible as it seems.
Yes, most banks require you to have at least a 580-point credit score in order to qualify for a mortgage. But it isn’t necessarily the end if your credit scores are lower than that.
In fact, there are mortgage options for borrowers who have credit scores as low as 500, insured by the Federal Housing Administration (FHA).
But you will have to jump through a couple of hoops to qualify for an FHA home loan:
- You’ll probably be required to make a down payment of at least 10% of the loan.
- The FHA only insures the loan. This means you will still need to find a lender willing to work with you.
These caveats can still be roadblocks, but it still makes homeownership possible for those with subprime credit.
Make a Bigger Down Payment
It only makes sense that most enders are reluctant to lend large amounts to people with bad credit.
That’s due to the fact that when they weigh their risk against the potential to profit (with interest), the risk that you won’t pay back your loan (and interest) is just too great.
On the same token, you can influence how risky lenders think you are by offering a larger down payment. Essentially, this tips their scales in your favor, even if your have low credit scores.
If you’re capable of making a down payment as high as 30% of the home’s price, you are likely to be shocked at the change in the lenders’ tune.
The more you can pay upfront, the more likely you’ll be to get approved for your mortgage even if your credit is less-than-stellar.
Bonus: paying more than 20% down usually means you’ll be able to avoid mortgage insurance. Not to mention that the less you lend, the less interest you’ll pay.
Look into the HOPE Program
Obviously, large down payments aren’t a viable option if your income is also low, in addition to your credit scores. In that case, you may feel that the cards are stacked against you.
Fortunately, there are still programs designed to help low-income families and individuals buy their home. For example, you might qualify for Operation HOPE.
Operation HOPE helps low-income, low-credit borrowers find loans from institutions that are insured by the Federal Deposit Insurance Corporation (FDIC).
The best part of the program is that it does not require you to put any money down.
Operation HOPE is available in numerous states throughout the Midwest and South as well as New York, Pennsylvania, and the District of Columbia.
Just because you have low credit scores doesn’t mean there’s nothing you can do. In fact, many people assume they’re stuck with bad credit when their credit reports are actually full of errors.
As a matter of fact, 20% of people have at least one error on their credit reports according to the Federal Trade Commission.
Before you go about trying to get high-interest loans, make sure your credit scores are as high as they should be.
Of course, if you want the best possible results, we’re here to help! Just give us a call or message today.