Having shaky credit when trying to purchase a house would definitely make every home buyer nervous but there is still good news. This is you can be able to secure a loan despite having bad credit but one thing is if you have a poor credit history then that would make the entire process more expensive and tricky. If you are not in a hurry to get a house then you can start working on boosting your bad credit. If you need to move to another house then you need to figure out how to get a loan for a house with bad credit.
How To Get A Loan For A House With Bad Credit
If you want to discover more realistic options, checking your credit scores and credit reports is one way of achieving that and what can be qualified as a bad or as a good score depends on the lender as well as the type of score you have. These scores according to FICO ranges from 300 to 850 and they are subdivided into five more ranges;
- 300 – 579 – Very poor score
- 580 – 669 – Fair score
- 670 – 739 – Good score
- 740 – 799 – Very good
- 800 – 850 – Exceptional score
The higher your score goes then the more options that become available to you even on home loans. You might not succeed in getting a home loan approved if your score is below five hundred and this would also prompt you to work on building up your credit score before applying for any other loan. Furthermore, having a middle score of five hundred provides you with the FHA government-backed loan option but this would be possible only if you can meet up with the one hundred percent down payment.
If your credit score lies in the mid-six hundreds then you are qualified to apply for nongovernment conventional mortgages. The good thing is you would get this sort of mortgage directly from the lender. One other thing that you must know is that getting a good interest rate and having your loan approved is not the same. The low mortgage rates that you can come across most times are specially for borrowers with exceptional or very good credit scores. If you have a low credit score then you are likely to pay higher interest rates.
If your credit score is poor and it is your first time buying a house, there is still luck on your side because you qualify for assistance programs but you shouldn’t get too excited or sad, This is because of the definition of a first-time house buyer varies.
Even if you have bought a house before, you can still qualify for a first-time buyer if the last time you bought a house was several years ago. Non-profit organizations, local and state governments all offer these assistance programs and the requirements vary as well.
They may also include purchasing the house in a particular area, if you work as a public service employee like a law enforcement officer or teacher, Having medium or low income. These programs also offer first time buyers several benefits such as;
- Covering part of your closing costs and down payment
- Helping you get lower interest rates on mortgages
- Offers loan with a no-interest pay option for closing costs and down payments
How To Boost Credit Scores Before Purchasing A House
Even though you are bent on getting a house right away, it is going to make quite some sense if you first of all work on improving your credit. This is very important if you are taking a large financial commitment that could stretch you more than your means or if you are struggling with some bills. Below are some tips on improving your credit scores;
- Pay down revolving debt
- Making payments on time
- Building your credit file
- Keeping your credit card open
- Making timely applications
- Having second thoughts before filing a dispute when applying for a home loan
Having a bad credit score but not at the bottom range still means you are qualified for a home loan but the setback is you are likely not to get a good rate. Looking for assistance options and considering your mortgage options are ways through which you can get a better deal.
However, if you pause purchasing the house for a while and decide to work on improving your credit scores then this would help in saving a huge amount of money over time.