Financial difficulties can affect anybody at any time, even with careful planning. When you’re attempting to recover, you may find yourself with a poor credit rating, making it challenging for you to make a big purchase such as a new house. However, you can take certain actions to put yourself in a better position to make this purchase despite your present financial situation. Read on to find the best tips for buying a home with bad credit.
Check Your Credit Score
Before you look at your available options, you need first to assess the status of your credit. Numerous sites will provide you with your FICO credit score for free, so avoid any sites that claim to do so for a fee. Depending on your score, you may need to make significant adjustments to improve it, or you may only need to make one or two tweaks to give it an adequate boost.
Look for Mistakes
When you receive your score, you should go over it thoroughly. Look for any filing mistakes, such as a closed account being declared open or the same debt being reported on multiple occasions, which could be artificially decreasing the score. If you discover any errors, you may file a dispute with the credit bureaus, which might take anywhere from a few days to a month.
Figure Out Your Loan Options
Your unique situation will dictate what loans you can obtain. Conventional loans usually require a credit score of at least 620 to qualify; however, if you have a high income or a big enough down payment, you may not require such a high score. On the other hand, loans guaranteed by the government—such as an FHA (Federal Housing Administration) loan—will accept a lower credit score and a lower down payment than conventional loans.
What To Do After a Short Sale or Foreclosures
Suppose you previously owned property but ran into financial difficulties and had to execute a short sale or foreclosure. In that case, you may face a unique set of conditions while you’re looking to buy a new home. After a short sale, you’ll need to go through several procedures to buy a new house, including waiting a certain number of years before qualifying for a new home loan. When you must undertake a foreclosure, the minimum waiting time will be significantly longer.
One of the best tips for buying a home with bad credit is to not let your current financial situation discourage you from trying to purchase a house. Everyone should have the opportunity to own a home, and options are always available to you.