Bad credit is a major issue in the United States. Over one-third of Americans have bad or no credit. There are many reasons for this, but the main ones are debt and bankruptcy filings. If you happen to be one of these people turned down because of your credit score, don’t worry! We will show you how to buy your dream house with bad credit using alternative credit options.
What To Do if you Have Bad Credit and Want to Buy a House?
If you are looking to buy a house, the first thing that you need is financing. Here is where your credit score comes into play. If your financial information isn’t in order, and it shows on your report, banks will not lend money to help finance the purchase of a home because they know there’s an increased risk involved if people can’t pay back their debts. So what do you do?
How To Get Your Finances In Order
The best advice we have for anyone who wants to buy a house but has bad credit is this: get rid of debt! It doesn’t matter how much or little debt you may have; all creditors must be paid off before buying real estate property. This means you will need to have a solid plan in place for how you will pay off your debts.
There are two main ways to get your finances to buy a house: through debt consolidation or creating and following a budget.
Debt consolidation is where you take out one big loan to pay off all of your smaller loans. This may be helpful because it will lower your monthly payments, but it does have its drawbacks. Namely, the interest rate on the new loan may be higher than the rates on your old loans, and you may end up paying more money overall because of it.
Creating and following a budget is another way to get your finances under control to buy a home. This method is a good way to see where your money is going and how much you can save each month. It may not be easy at first, but it will be worth it in the end.
The Importance of Saving Money for a Down Payment
It’s no secret that buying a house costs money. In addition to paying back your loan, you will also need to come up with a down payment. The average down payment amount is 20%, but this varies depending on the type of mortgage you get.
If you don’t have enough saved up for a down payment, there are still options available to you! One option is to get a family member or friend to cosign on a loan with you. Another option is to take out a loan against your future home equity.
Types of Mortgages Available for People with Bad Credit
The good news is that there are a variety of mortgages available for people who have bad credit. These include:
- FHA loans
- VA loans
- USDA loans
- Conventional 97% mortgage
Each type of loan has its own set of requirements, so be sure to do your research before applying.
Tips for Improving Your Credit Score
Even if you have bad credit, it’s not too late to improve your score! Here are some tips on how to do this:
- Check your credit report regularly and correct any errors that may be present.
- Pay all of your bills on time.
- Don’t open any new lines of credit until you have the money to pay off that debt too!
How To Find The Right Real Estate Agent For You
Yes, we are going back to real estate agents again because they are important when buying a home. If you don’t have bad credit and want to buy property, then it’s likely that you will use an agent as well. However, if you’re trying to get into homes with bad or no credit, then there may be some extra things for which to look out in addition to everything else:
A great deal on payments can lead people who shouldn’t own a house (because they won’t make their monthly mortgage payment) to believe they can afford to buy a house on time.
Some unscrupulous real estate agents will take advantage of people who are desperate for houses and do not have perfect credit by lying about the terms of their payment plans, interest rates, etc., so be sure you know what you’re getting into before signing anything!
So there you go- how to buy your dream home with bad or no credit in just ten simple steps. We hope that this information has been helpful to you, and we wish you all the best as it is purchased your next property! You don’t need good credit to get a mortgage loan but if possible, try improving it first because many financial institutions will require it. You can build up your credit by getting a secured card and making sure to pay the balance in full each month!