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Working with bad credit
Having poor credit can make it difficult to purchase a home. Late payments, repossessions, charged off accounts, and bankruptcies can all lower your credit score. With poor credit, you can expect to be charged a higher interest rate, and be required to put down a larger down payment. It may also be harder to purchase a new home, and you might only be able to purchase a used or repossessed home.
There are a few things that lenders look for on your credit report that make it much harder to purchase a home. They are bankruptcies and repossessions. If you have had a bankruptcy in the past few years, it will be very hard to finance a home. If you have had any repossessions it shows lenders that you might be too high risk for them. Avoid both of these if at all possible.
If you do have poor credit, there are some steps that you should take before beginning your home purchase process. First, make sure that you pay ALL of your bills on time, and pay as much off of high balances as you can. Higher balances will hurt your credit score. Second, if possible, open a credit card account if you do not already have one and always pay it on time. A department store credit card can also help you build positive credit. Remember that your credit report will show every time you make a late payment, and your lender will be able to see all of that information.
If you are not able to purchase a home because of bad credit, you do have other options. One option is to have someone co-sign with you. Usually a friend or relative is the best choice for this. If they have good credit, it can offset bad credit and make it easier to purchase a home. Another option is to have someone purchase the home under their name for you, but you make the monthly payments. This is called a “buy for”, and it can be a good option for someone with bad credit.
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