Bad Credit Mortgage – Credit Tips

If you have bad credit, you are far from alone. Job loss, medical expenses, divorce and other factors can affect many people and drag down their credit scores. If you have been working to get back on the right path so that you can invest in a home, your bad credit does not necessarily have to hold you back from your dreams.

Work on Improving Your Credit

Look over your FICO score and your credit reports to see which areas you can improve most quickly. For instance, eliminating inaccurate negatives and ensuring that all of your accounts that are in good standing are on your report can increase your score without you having to do a thing. Consolidating loans or opening new lines of credit can help or hurt, depending on your situation. Talk to a credit repair professional for advice.

Look for a Lease to Own Agreement

In a lease to own agreement, part of your rent payment each month goes toward the purchase of the property. Many landlords are more willing to work with people with so-so credit than banks are. The leasing period usually lasts about three years; during this time, work to increase your credit score so that you qualify for a regular loan when the time comes.

Make a Large Down Payment

With a sizable down payment, you can often get more attractive terms. If you have an inheritance, a relative willing to help with the funds or another way of getting 20% of the cost or more, see if this can help you get a loan.

Look for Owner Financing

An individual homeowner may be willing to overlook a poor credit history if you can demonstrate that you have improved your spending habits. Getting a Bad Credit Mortgage can be avoided. Usually, these arrangements involve a higher rate of interest; this can work well as an investment for the current owner while giving you access to homeownership.

Another alternative is to see if you can find a seller willing to take back a mortgage. This would, like the arrangement above, make them your lender. It is often easier to get an arrangement like this with poor credit than it is to work directly with a bank.

No matter which of the above strategies you employ, continue to work to improve your credit score. Pay every bill on time every month. Open new revolving and installment credit so that you can build a new history of on-time payments. Pay down any loans so that you can improve your debt to income ratio. Once your credit rating improves, you will get opportunities to refinance at better rates, keeping more of your money in your pocket. Remember that it’s a marathon, not a sprint. While there are ways to get a mortgage now with bad credit, working to improve your situation means a better deal for you over time.