How to buy a house with bad credit 2015
The amount of your loan, and your eligibility, depends on the length of your service and your service commitment. Ask around to see which banks keep loans and are willing to look at the whole picture, rather than a bad mark or two on a credit report. Lenders will still consider your low credit score or other credit problems.
Many of these items can be removed by working with the creditor, establishing communication and finding out what is possible can take a few minutes and go a long way. There are groups that we can refer you to if you would like to have someone else work on the negative items that have led to the bad credit if you would like.
How to Buy a Home with Bad Credit
Many times this is the fastest way to address these items, bring in the pros. The other side of your credit has to do with building credit, or the present.
The credit bureaus that report your scores are essentially reporting how well you manage debt. If you have not had any debt, or open lines of credit in a few years, you will not have bad credit but may have no credit at all.
It is important to have three open lines of credit at a minimum. You would be amazed how much your scores can improve by simply having open lines of credit that are paid on time. As per FHA guidelines, you qualify for as little as 3. Moreover, the interest rates are sky high and the terms of the loan are highly unfavorable. Improving Your Chances for a Conforming Loan Applying for a major credit card after a foreclosure is a great option of improving your chances of getting a conforming loan. You might think, that you'll find it rather difficult to acquire a credit card, however, the truth is you actually improve your chances of getting one, after filing for bankruptcy.
Since, you filed for bankruptcy in order to start afresh, your lender knows that you have no debts. This will give you a variety of documents to look over and help you catch any errors that need reporting. Check your financial history for any credit score red flags.
It's not just the raw numbers that affect what kind of home you're eligible to purchase. It's the reason behind those numbers.
If any of the following credit red flags are part of your financial history, you may have to wait to apply for a loan. You should also be prepared to explain the factors that caused these situations to a lender.
Late payments on student loans reflects poorly on your application for conventional loans, as well as FHA loans. If you've been late on a loan payment within the past 12 months, be prepared to explain the situation. You must wait 36 months from the date of the foreclosure to be eligible for an FHA loan, and the down payment will be 3.
Conventional loans, however, require 7 years to have passed. For conventional loans, you must wait 48 months.
When lenders examine your credit score, they pay close attention to your debt-to-income ratio. Eliminating existing debt is important to improving your credit score, and your chance at purchasing your own home.
Look at all of your credit card debts, and student loans. Try to make a dent in these payments, even if it means sacrificing in other areas of your budget. The more debt you can eliminate before applying for a loan, the better. Many tools are available online, such as the ReadyForZero tool, that can help you manage your debt and bring overall debt levels down.
Explain your financial history. Lenders understand extenuating circumstances can affect your financial situation or that sometimes bad credit is a result of a one time issue that you've moved past.
When applying for a loan, be prepared to explain any bad marks on your credit score. Get as much supporting documentation as you need, such as medical reports, pay stubs, letters from bosses, and bank statements.
Bad Credit? No Problem: 8 Ways You Can Still Buy a Home
This can explain delinquent payments or accruing a heavy amount of debt. Ask upfront about any concerns they may have regarding your history, and be prepared to give specifics as to what lead to your current credit score. Consider renting to own. If you have a poor credit score that makes lenders wary of dealing with you, rent to own can be a good Plan B. This option however takes a good deal more patience, as it can take awhile to connect with the right professionals. See my previous post on how to buy a house for cash for more strategies and ideas. You can also consider the following solution.
Mobile homes have their advantages, including lower prices than site-built homes, which is great if you have to pay cash. If you buy a mobile home on land, you even get appreciation like you do with other homes. Alternately, you can buy a mobile home on a rented lot to lower your housing costs and then save up for a site-built home. Even though the value of a mobile home in a park often falls, this still makes sense if your overall cost is lower than renting an apartment.
In reality, we sold the home for exactly what we paid. Our savings went toward a house we purchased in Colorado.