Your credit score can help or hinder your ability to be able to obtain a mortgage. Although most lenders are strict when it comes to credit scores, there are some steps you can take so your score does not prevent you from buying a new home.
Why Is Your Credit Score So Important?
A person’s credit score kind of hangs over their head in everything they attempt to do. From renting an apartment to purchasing a home, having a good credit score certainly makes things easier. It is important individuals fully understand how their credit score is determined and used so they can protect their number and keep it as high as possible. Whether it’s a mortgage for self-employed or company-employed borrowers, having a clean credit history and a good credit score is essential if you want to secure a low-interest rate.
Can You Purchase a Home with Bad Credit?
Most people erroneously believe they will never become homeowners until their credit score is high. Believe it or not, individuals with poor credit scores become homeowners each and every day. Thankfully, there are three proven strategies you can take for purchasing a home when your credit score is lacking.
3 Proven Strategies for Purchasing a Home with Bad Credit
The process of applying for a home loan can be an intimidating process, especially when your credit score is low or even bad. Those who are seeking a loan with bad credit need to learn about the following three strategic steps they can take to obtain a loan and purchase the new home they desire.
- One of the first things individuals with bad credit should do is begin saving. Because your credit score is not where banks would like to see it at, they are going to require a much higher down payment. If you can save 20% or more of the home purchase price, you are going to be more likely to be able to secure a mortgage loan. Paying a big down payment will lessen the amount you need to borrow which means less money to repay.
- There is also the option of seeking a private loan from a family member or friend. The people in your life know more about you than your credit score. Parents, grandparents, or aunts and uncles may be willing to offer a private loan. The loan can be handled the same as if it was obtained from a mortgage lender.
- When your credit score is preventing you from getting loan approval, a co-signer can help. Having someone with a strong credit score to co-sign on the loan offers mortgage lenders greater security and less risk so they are more willing to approve the loan.
How to Improve a Bad Credit Score
There are a few things individuals can do to help improve their credit score. It may take time, but paying down old debts is a sound way of upping the score.
Individuals should also check their credit report for any errors or outdated information. Most items should fall off of a credit report after ten years. If there are errors, these need to be reported to the creditor right away.
While a bad credit score can be detrimental, even those with a poor score can obtain a mortgage. If you are concerned about your score, make sure to check for errors and work towards improvements over time.