Bad credit is a huge issue for getting a Mortgage because lenders’ business is for making money and money defaulters are their major issues. While Mortgaging, you are borrowing a huge amount of money and no one wants to lend money to high-risk borrowers.
Many people lose hope of buying a home for themselves due to this bad credit issue. If we tell you that it is possible to buy your home even if you have bad credit, will you believe it? Yes, here we will tell you 5 ways to buy a home even if you have bad credit.
5 Ways to buy a home with bad credit
Bad credit is no more an issue in your journey of buying a home. Let’s see how you can make it possible:
Save for a large down payment
With the large down payment, you need to borrow less money and thus lower the loan amount. If you borrow less, the lenders can consider your application for a loan favorably. Try at least to pay 20% of the total house price for the down payment. This way you will require fewer loans and you can also avoid PMI (Private Mortgage Insurance).
Rather than borrowing money from professional lenders, you can borrow it from some friend or family. If you are desperate to move to your house, you must think about this option. Friends or family know your credit better than what banks know. They know your repayment habits. They can trust you more. They will not charge you huge interest or any insurance. You can lure them with a small amount of interest in their money and they will be ready to lend you the amount that you can use for buying a home. Also, there will be no issue of missing the repayment date, 1-2 week delay will not charge you an extra amount.
Co-Sign with someone
If it’s getting hard for you to get a mortgage due to your bad credit, Find a co-signer who has good credit. His good credit report can help you to get a loan. Many times it happens that your credit score is bad but you have other income options that are not qualified for the loan like investment income, etc, Here, the co-signer credit score can help you. But, it can be a problem for the co-signer. In case if you default on your loan, it will affect the co-signer’s credit score.
Find FHA Mortgage
For people with bad credit, there is Federal Housing Administration in the USA. In FHA, If you have a Credit score over 580, you can get a Mortgage if you can make a down payment of 3.5% and if your credit score is below 580, you can get a mortgage if you can make a down payment of 10%. This seems to be a little hassle as FHA loans require Mortgage Insurance Premiums.
- Buy a cheap and mobile home
Mobile homes are available at low prices. They are a good option if you don’t have enough amount to buy a site-built home.
- Consider different loans
Many small banks easily give loans even if you have a bad report on credit. They consider other facts also rather than just sticking to a credit report.
- Improve your credit
This can take time but is worth it. You can wait a few more years and improve your credit score.