The odds are often stacked against the average person. Therefore, it isn’t uncommon to find your credit score taking a dip. Sometimes it is due to poor financial decisions and other times it is just bad luck. Well, regardless, can you buy a home with poor credit?
The answer is yes, you can! Nevertheless, you will have to face a unique set of circumstances. Here is what you can expect if you are buying a home with this kind of financial status:
Save for a Larger Down Payment
The problem with a poor credit score is that banks and other traditional lenders lose faith in you. They see you as a risky investment and may be more likely to turn down your application. Even if they don’t do this, they may quote an interest rate that is just too high for you.
One of the ways to reduce the mistrust in you is to save up a larger down payment. If you are able to pay this sum upfront, it may buy you some goodwill. Bear in mind that your interest rate may still be quite high with bank and similar institutions.
Be Aware of Alternate Loan Options
There are actually a lot of people in your situation which is why sub-prime mortgages exist. In case you are wondering about the sub-prime mortgage definition, is a loan that is given to people who have a poor credit history or have a low income status. These loans do incur higher interest rates, but these can vary from one lender to another.
There are three types of loans that you can choose from – fixed rate, variable rate, and interest only. With the fixed rate, your interest rate doesn’t change for the duration of your loan. With variable rate, it follows the movement of the market. And, with interest-only, you can put extra cash flow towards paying off your home loan.
Get Some Assistance
With a low credit score, you are going to have to jump through so many more hoops to get approved for a loan. This is why it is a good idea to get the help of a certified mortgage broker. Not only do these professionals offer quite a bit of experience, they also have an amazing network of connections.
As such, they are capable of finding lenders who are better suited to your financial situation. They may even be able to get you a loan with a more reasonable interest rate as well.
Make Fiscally Sound Decisions
When you buy a home, you are incurring a monthly debt that needs to be paid. This is why you should get your finances in order. Your first priority should be paying off your loan. Structure your finances so that you can tackle this amount each and every month and on time. In doing so, you will help yourself to get into a better status while ensuring you continue to have a home.
You can be a home owners with poor credit. You just have to be aware of your situation as well as the barriers and opportunities that lie before you.