If you’re looking to buy a home but have bad credit, are you out of options? NO! Keep reading to find out what alternativesÂ you have and for some tips on improving your credit score.
Why does your credit score matter? Mortgages consist of a lot of money, and lenders want to be sure they’re secure in lending out the money. To do this, they want to make sure that you have a good record of paying off your debts and doing so on time. This will help them make sure that you will pay them back.Â
What’sÂ Considered Good and Bad Credit?
Any credit score under 600 is bad, while anything in the high 600s to 700 and aboveÂ is good (with a perfect score being 850). In order to get the best mortgage and insurance rates, you generally must have a credit score of 740 or higher. Click here to seeÂ Bankrate’s explanation on credit scores.
If you’re in that lower range, there are some options for you still, but you’ll definitely want to start to improving your score!Â
Options to Buy with Bad Credit
Save a large down payment. The larger your down payment, the more likely lenders are to agree to lend money to you. If you prove that you can save money and that you know how to deal with moneyÂ in one way or another (even though you have bad credit), lenders will be more willing to work with you. Understand though, that your interest rates are likely to be higher if you go this route.Â
FHA loans! Being guaranteed by the federal government, the qualifications for this loan tend to be less than a conventional loan. You only need a score of at least 580 to qualify for this loan.Â
Check your credit score for any errors. Scour over your credit score and make sure that everything is correct. Mistakes happen, so make sure that it’s not happening to you. If there are mistakes, get them fixed.Â
If you’re a veteran, there are other options for you. Click here to read my blog on buying a home as a veteran.
Check out these Gilbert homes that qualify for FHA loans
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How to Improve Your Credit Score
Change your spending habits month-to-month.
Budget out your money, and make sure you live on less than you make.Â
Pay off your credit card(s) and other debts on time!Â
Be patient. Building up your credit score will take some time. Just expect it. During this time, be sure to practice good financial habits!
Save money, and, if possible, increase your income. Whether you use your money differently or get a part time job for the time being. Click here to read my blog on different ways you can save money without getting another job.Â
This isn’t necessarily a bad thing. Your mortgage lender can still look at your track record of making payments. How you do on paying your car loan and your rent can be an indicator for them onÂ how well you pay off debt.
Click here to read my blog on affording your dream home.Â
Want to see what option is best for you? Give me a call today and I can help you look through different options available!Â 480-329-7489!
For more tips on buying with bad credit or improving your credit score, check out these articles: