Financing with Bad Credit – How to Buy a Home?
When it comes to financing with bad credit, there are plenty of things that you can do. If you are also having the American dream of owning a home, do not let your poor FICO score create obstacles in your way. There are several options available out there. It is possible to obtain a mortgage with no money down even if your credit is not perfect.
Your awareness, patience, and consistency in your efforts are the key factors in this regard. Following is a brief rundown on how to go about it.
Sub-Prime Mortgage Lenders
Though most lending institutions prefer to lend money to only those applicants who have good credit history, there are still some lenders who specialize in bad credit loans. The only problem here is that they charge a much higher rate of interest. The good news is that your application can get an easy approval. The chances of rejection are minimal. Besides that, you can get things back on track by refinancing your mortgage again once your credit situation improves.
When it is about , the most difficult thing is to find a lender that is not going to reject your application. A great way to make this task easier is by taking help from a mortgage broker. If you are having difficulty in finding a lender on your own, you can contact some brokers. Brokers have relationships with lenders and they can help you find a suitable lending program. They will obviously charge you a certain amount of fee, but considering the very fact that their services can save you a lot of time (and probably money by helping you get approved for low rate loans), it is often worth using their services. However, make sure that you enquire about their charges before getting into any deal with them.
Lease-to-own property can also be another great way for financing with bad credit. This option is sometimes also referred to as rent-to-own agreement. As per this process, you rent a property for a certain period of time, but a certain portion of your rent goes toward your down payment. Once your credit situation gets better and you find a suitable mortgage program, you can go ahead and take the ownership of that property. Make sure that you understand the terms and conditions thoroughly before you sign such an agreement. If you are considering using this option, you will first have to find a motivated home seller. If you cannot find one on your own, you may like to get help from a professional and experienced real estate agent.
Have a Family Member Co-Sign the Loan for You
If none of the above strategies work, you can get help from a family member (such as your spouse). Even if you have a less-than-perfect credit, if someone (who has good credit history) co-signs the home loan, you can easily get the approval. Here, it is important to note that the co-signer will be liable to make the repayment in case you fail to do the same. That is the reason finding a co-signer is not at all an easy task. But, if you are lucky to have someone who trusts you, this option may just work.
If all your strategies for financing with bad credit fail, the only option available to you is to have some patience, wait for 6-12 months, and use this time period to worthiness. You can do this by being on time with the monthly payments on your existing debts, by not applying for further loans, and by showing great financial discipline.