Preparing to buy a home should be an exciting time in a person’s life. It’s a big step, and should be one that you take confidently.
If you have a low credit score, however, you may feel like home ownership will be out of your reach or more difficult to achieve. That may have been true once, but it isn’t the case anymore.
Potential home buyers now have lots of financing options that can help them secure their dream home, even if they don’t have the best credit history financial standing.
Buying a home with bad credit is now a real possibility, but you have to know the right steps to take. Read on for our simple guide, so you can eventually be ready to buy the house of your dreams.
1. Determine a Realistic Budget
Buying a home with bad credit is possible, but you have to be honest with yourself about how much home you can afford. If you’re already standing on uneven financial ground, the last thing you want to do is take on more debt than you can handle.
Start by looking at the numbers. How much do you make each month? How much do you have saved for a down payment? How much are you already paying toward other debts?
It’s also important to remember that the listing price is not the only cost associated with buying a home. There could be closing costs, a home inspection cost, and moving costs that you will have to pay. Factor those into your overall budget so you don’t end up spending more than you can realistically afford.
2. Consider a Co-Signer
If you think that your bad credit may stop you from getting approved for a mortgage on your own, consider asking someone with a more secure financial standing to co-sign your mortgage.
Your co-signer should be someone that you have a close, trusting relationship with — such as a spouse, parent, or sibling — and he or she should be willing to take on the financial responsibility of co-owning the property.
A co-signer will likely have to share their credit report, income information and other qualifications with the lender, so be sure you’ve prepared them to do so.
3. Explore Mortgage Lenders
Traditionally, if you wanted a mortgage loan you had to go to a bank. Now, however, mortgage lenders are becoming a popular option because they can make it easier for everyone — even those with bad credit — to buy a home.
Mortgage lenders can offer non-conforming loans that don’t have to meet a bank’s stricter criteria for funding.
They are willing to work with potential home buyers who don’t have a great credit score and can find financing options that enable those people to buy a home like they’ve always dreamed about.
Want to Know More about Buying a Home with Bad Credit?
Our lives are more complicated than they used to be, and between student loans and credit card debt, it’s common for your credit score to take a hit. But that shouldn’t — and doesn’t have to — stop you from being able to buy a home.
For more information about buying a home under any financial circumstance, please explore our blog.