How to Buy Your First Home With Bad Credit.

Posted by Amanda C Dempsey on Wednesday, March 23rd, 2016 at 1:47am.

When purchasing a home, a bad credit score can seem like the worst thing imaginable. As profitable as it is to actually own your own home, you may find yourself on the wrong end of renting for a very long time. But, with the market being what it is today, it is actually a buyers world out there, and, good credit or not, you are more likely to be able to purchase your very own home if you simply follow this quick and easy guideline in order to make the process go just a little bit more smoothly.


The first step to buying a home is to research federal mortgage programs and search for the right property. The Veterans Administration as well as the Federal Housing Administration can be much more forgiving and provide affordable loans that even the most tattered of credit scores can be willing to work with. You also check with local and state programs, either of which may surprise you with a variety of options for those that are willing to put in the effort and do the work towards your goal of owning a home. This all leads to finding the home itself. Once you have a loan you then will have a better understand of the properties available to you.
Do not be afraid to contact agents to find low down payments. You will find most agents more than willing to help out a potential buy or renter if the circumstances are favorable, even if you ARE looking at a bit of bad credit. Another good source of affordable housing would be the HUD. The U.S. Department of Housing and Urban Development sells foreclosed homes at market value giving you a distinct advantage in finding your new house. Granted, nothing comes for free in this world, but by using HUD rather than venturing out on your own, you stand a far better chance. Another organization to contact would be the Federal Housing Administration. The FHA can offer loans with extremely low down payments, especially for first-time buyers. You will need a minimal credit score of 580, but if you have at least that, it's a start. Always take advantage of a good low down payment whenever you can find one!
In the event a low down payment just isn't in the cards for you, don't be afraid to save up for a much big down payment either. Your first payment could be anywhere from 15 to 30 percent of the settled price and if that is not a number you are comfortable with right now, it is probably better to wait until you are more financially sound. The downside of bad credit is your down payment is likely to be a bit more than it would be if your score was a little better, so be prepared to take a bit of a hit. It is a good idea to plan to have at least 20 if not 30 percent saved up for the asking price before you even go in. This, unfortunately also means you are going to have to plan for higher interest rates.
Since bad credit ratings make you seem like more of a risk, lenders are going to be a bit more leary to give you a bit of cash. This means less leeway when it comes to the over all repayment, meaning you will be paying higher each month than someone with better credit would. This is not such a terrible thing. After all, even if you may be paying a hundred or so extra a month for your home than your neighbor, at least, you have a home to pay for. Just be sure to make a budget and really stick to it. You would be surprised once you find out what you can spend and what you can live without. You can also consider seller financing, which may make the interest rates higher, but if you are in a pinch and need to find a place sooner rather than later, your down payment will be far more manageable.


Ultimately, your goal here is to eventually salvage your bad credit. No one is perfect, but in today's society, your credit score better be near to it! Do not be the victim of ignorance. You can use a variety of tools both online and with professionals in order to follow your score and keep track of how well or "not so well" you are doing. The three main credit unions are Equifax, Experian, and TransUnion. These are the big three which hold the information about your credit that will be given to lenders. This means, by law, you are able to check your score for free at least once a year. Scores can range from 300 all the way up the elusive "perfect" 850. Anything above around 700 is considered decent, where as anything under 600 is considered poor.
Once you have a score, make plans to start fixing it. Work with the lenders, not against them. Contact any and every company of which you owe money and see what you can work out. Chances are, a business is willing to work with you to get the money they are owned rather than just keep sending you notices in the mail only to have them ignored. If you do have payments, make sure you get them in on time every time. The more you pay on time, the better off your chances of fixing your score will be.


A bad credit score isn't the end of the world. In fact, in today's economy, a bad credit score is more likely than a good one. But, if you work towards fixing the damage that is already done and you use the tools provided to you, owning your own home can quickly go from a dream to a reality in a matter of days. Yes, even you can own a home, bad credit and all. It's all just around the corner.

Thank You For Reading!

Amanda Dempsey
Business Development Manager

VIP Realty Platinum
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