Are you tired of writing checks to your landlord every few weeks, but are unable to purchase a home due to your bad credit score? Looking for a way to make things work even when you are at your lowest?
The good news is there is still hope for you, and what you need to start with is your credit score. If you do not know where you stand, we suggest you start by finding out exactly how deep in the barrel you are. Once you have your credit score in hand, here are the 5 steps you need to follow to find the perfect home with bad credit.
Start by checking for errors in your credit score. Keep in mind that your credit score is calculated using your credit data in your credit report. The credit data is a view of how you have spent borrowed money, and if you see any errors that damage your credit rating it's time to file for a change. Every citizen receives a free copy of their credit score every 12 months, and you can even use online sources to get a copy.
Once you have determined what your exact credit score is, get ready to pay a higher percentage of interest rate. Due to your current credit score, standing lenders are going to charge you more due to the risk involved. This allows the lender to protect themselves in case the partnership does not work out in the long run. Moreover, most individuals with a low credit score are known to miss a payment date or miss the payment on a whole.
For instance, you take on a 30-years fixed-rate mortgage loan for $200’000 with a 3.77% interest rate. Your monthly payment without property taxes or homeowners insurance should be about $928.
On the other hand, when you take out the same amount with a 5% interest rate, your monthly payment without taxes and insurance will be about $1’073. A $145 difference per month, that will add up to $1’740 annually.
Loans offered by the Federal Housing Administration (FHA) accept a lower credit score. With a 580 FICO credit score, you can easily qualify for an FHA insured mortgage and even get a 3.5% down payment. However, your first FHA loan will be insured by the FHA, but they come from mortgage lenders. Similarly, while they are open to offering loans to individuals whose credit score is as low as 500 - it does not mean they accept every application they receive.
Furthermore, FHA loans come with financial penalties, and you cannot cancel their mortgage insurance throughout the loan period. Another catch with FHA is that their mortgage insurance ranges a bit higher than others, where you can find yourself paying anything from $40 to $83 on a $100’000 loan.
Lenders are more open to you when you offer a good chunk of money as down payment. There are times when you can even secure a 3% or lower interest rate based on your down payment. Additionally, a larger chunk of down payment can even secure your approval, while others are easily rejected due to a bad credit score.
When you put in more money as a down payment, you show that you are interested in making a change. Creating a certain level of trust that enables the lender to see you are willing to stick it through the entire process.
Rebuilding your credit score even by a little can help you secure the perfect home even with a bad credit score. When lenders see a change, and how you are working to build a better ranking, they are more open to offering you a loan.
Holliday Credit Repair can help you find the perfect home even when you have a bad credit score! Get in touch and get started with the process.