Are you planning to finance a home purchase with bad credit? You are not alone. This article is designed to give you the steps involved to buy a home with less than stellar credit.
You are aware of the fact that any kind of financing can be quite tricky with lousy credit. So whether you are rebuilding your credit score after a financial mishap or you are trying to build it from scratch, financing a home purchase can be quite challenging.
The most common way through which buyers with low credit scores can finance their home purchase is an FHA-insured mortgage loan. These kinds of loans have low down payment options, and they do have minimum credit score requirements. You should have it at the back of your mind that only certain lenders handle FHA loans. Therefore, you may be required to look for lenders that specifically offer such loans. If you are planning on getting your home purchase financed with bad credit, here are some steps to take:
Locate a flexible lender
As mentioned earlier, you need to look for a lender that handles government-insured loans. Apart from the ability to handle FHA loans, such lenders must have a flexible credit requirement. Though FHA loans do have a minimum credit score requirement, lenders may set their standard regarding the down payment and credit score requirements above those minimums. One of the easiest ways to locate a handful of lenders is to make use of an online lending network, which saves you from moving from one place to another to fill out applications. With an online lending network, you are likely to connect with multiple lending partners to find a lender that matches your requirements.
Boost your credit score as much as possible
Another excellent way to finance your home purchases with poor credit is to increase your credit score. Doing so, in turn, increases your chances of getting a mortgage loan. You should start the process of boosting your credit score a year or two before you consider home financing.
Save towards the closing cost and down payments
A healthy down payment has the potential to help you boost your low credit score when financing your home purchases. Most lenders prefer a minimum 20 percent down payment of the purchase amount. Any amount short of this may require you to pay private mortgage insurance.
Trying to purchase a home with bad credit does not need to be a stressful endeavor. Visit your financial institution and talk to a financial advisor about viable lending options.