Bad Credit Home Loan – Is it Possible?
Having bad credit and trying to get a home loan can make you feel helpless. Low credit scores result in rejections on credit card applications, and a home loan can seem completely out of the question. But, educating yourself about your credit and taking some simple steps to repair it can make home ownership possible.
First, Find Out Where You Stand
Many people who have bad credit just know that it’s bad; they haven’t found out the specifics. Some don’t even know where to look. But, knowing exactly what needs fixing is one of your most powerful tools. Apply for your free credit reports at AnnualCreditReport.com. These three reports will show all of your relevant credit history, including an negatives.
Target Problem Areas
First, eliminate any inaccurate entries. This can include debts that aren’t yours as well as ones that should have been removed from your report. Just getting inaccurate negatives off your report can increase your score dramatically.
Next, address valid negatives. If you have accounts in collections, make arrangements to pay. Often, you can get a significant discount on a bill that is in collections, since the collection company paid only a fraction of the total to buy the debt. Make sure that any debt you satisfy is noted on your credit report.
Build New, Positive Records
Apply for a secured card if you do not qualify for one that is not secured. Pay the bill on this card religiously so that it builds positive entries in your credit record. You may wish to sign up for automatic payments so that you do not need to worry about remembering to pay the bill.
If you are car shopping, consider getting an auto loan. Installment loans show that you can be trusted to make payments over time. Car loans are easier to get than many other types of credit. And, if your credit is currently bad, you will likely be able to refinance for a better deal once it improves. As you add positive entries and rehabilitate your credit, watch your score rise on a site like CreditKarma. Seeing points go up every week can keep you motivated.
Meanwhile, Build Savings
As you make your journey toward being a lendable individual and need to get a bad credit home loan, build up a nest egg for your down payment. The more you can save, the better. You can get some loans, like FHA loans, with down payments as low as 3%. So, on a $100,000 home loan, you would need $3,000. But, the more you save, the better a deal you can get. Many people recommend putting down as much as 20% of the price of the home.
There are many ways to save up. You can automatically transfer a percentage of your pay check every week. Other people get part-time holiday jobs and sock away the extra paychecks.
Over time, the combination of improving credit and saving up will make your dreams of home ownership a reality.
For additional information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.