How to Buy a House with Bad Credit

How to Buy a House with Bad Credit

By: Kevin Giffin - Posted in:
Girl looking at homes to buy with bad credit.

A house is probably the single biggest purchase you will likely ever make in your financial life. After all, you’re paying tens of thousands to millions of dollars, and who has that much money laying around? Unfortunately, many prospective homeowners don’t realize that buying a house requires years of planning and the development of a solid credit score. And if you haven’t done this planning, you’re going to need to learn how to buy a house with bad credit.

It’s occasionally possible to buy a home with bad credit, but your interest rates will be outrageous; you will literally pay for it. If you don’t have a good credit score, it’s wise to exploring fixing your credit. Don’t worry- it’s not as difficult as you may think.

Here are some tips on how to improve your credit score and some programs that may help you out!

Steps to Buying a House with Bad Credit

Let’s get one thing clear: unless you have a tremendous amount of money for a downpayment, you’re not likely to get approved for a mortgage by a bank with a bad credit score unless you can afford to pay a huge downpayment.

However, it is possible to fix your credit yourself. Our recommended steps to buying a house with bad credit actually prioritize raising your credit instead. It takes time, but a higher score will give you access to lower interest rates and greater financial freedom throughout the course of your life.

If you’re looking to purchase a home soon or just want professional assistance, there are also companies that fix credit. We’ll discuss how to buy a house with bad credit using these companies shortly.

Buying a House with Bad Credit: Step-by-Step!

The first of many steps to buying a house with bad credit is to diligently work to raise your score. Here are a few steps you need to take to raise your credit.

1. Examine Your Credit Score

If you’re taking steps to buying a house with bad credit, getting a sense of your finances will be crucial. A credit report will help you get a sense of your financial situation. Once you have your credit score, look for errors on your report and identify areas for improvement. Maybe you see you could improve your on-time payment of bills, or that you’re using too much of your revolving credit. Heads up: Multiple credit inquiries can negatively impact your score, but you really only need one to identify a starting point.

2. Keep Credit Cards in Check

Your credit utilization plays a large factor in your overall credit score, so you’re putting yourself at a disadvantage if your credit card balances are high. Work to pay them down, and ideally, get to a point where you’re able to pay off the balance every month. One of your first steps to buying a house with bad credit should be ensuring you’re as debt-free as possible. You’ll be adding anywhere from a few hundred dollars to a few thousand each month. Can you afford to pay a few hundred in credit card interest, too?

3. Pay on Time, Every Time

Your payment history plays a large role in your credit score, so if you’re taking steps to buying a house with bad credit, the more on-time payments you have, the better. And there are typically many more opportunities you have to do this than you may think. Student loans, credit cards, and auto loans will all help your payment history. Meanwhile, staying on top of rent or utility bills will ensure you don’t get a negative mark on your credit score. Over time, as you take your steps to buying a house with bad credit, your punctuality will pay off.

Companies that Fix Credit

Time is one key to raising your credit yourself. The steps to buying a house with bad credit change if you’re planning to purchase a home sooner rather than later. While they differ from programs for buying a house with bad credit, they can be a useful avenue for how to buy a house with bad credit.

There are numerous companies that offer credit repair services, which can really help if you’re buying a house with bad credit. In large part, credit repair services includes disputing inaccuracies in your credit report. This could be an issue of fraudulent accounts, bills improperly reported to the credit bureaus, or a host of other inaccuracies. Credit repair agencies offer a range of services: They may dispute errors only with the credit bureaus, or they might contact creditors and collection agencies.

If you opt to use a credit repair service, you need to do some serious due diligence. Check their online reviews, ratings, and see if they offer things like guarantees or free initial consultations. The finance industry is saturated with hucksters and companies who don’t have your best interests at heart. When you’re thinking about the steps to buying a house with bad credit, you need to spend every dollar wisely.

These companies can boost your credit score and make how to buy a house with bad credit easier. But when buying a house with bad credit, it’s on you to make sure a company is actually the right fit for your needs.

Programs for Buying a House with Bad Credit

One of the best methods for how to buy a house with bad credit is to use one of the major programs for buying a house with bad credit. A Federal Housing Administration (FHA) loan is a government-insured loan, so it allows lenders to give you better rates. Getting a loan through these programs for buying a house with bad credit can help you lock down low down payments, low closing costs, and some credit flexibility. FHA loans are available to any borrower with a credit score of at least 500.

For the most part, programs for buying a house with bad credit are fairly flexible at most major banks. However, the banks may vary on details like:

  • Minimum Credit Score
  • Interest Rates
  • Required Downpayment

Keep in mind that just because there are programs for buying a house with bad credit doesn’t mean you should buy a home. Outstanding debts or a history of late payments can suggest you aren’t prepared for home ownership, and you run the risk of exacerbating your financial situation. This doesn’t mean you shouldn’t learn how to buy a house with bad credit—you just need to determine whether or not you should take on a mortgage loan. Then you can look at programs for buying a house with bad credit.

Buying a House with Bad Credit

You can avoid the steps to buying a house with bad credit entirely by raising your credit score. With a higher score, lenders won’t just loan you money but may offer you lower interest rates—saving you thousands down the line. And then it’s not a question of how to buy a house with bad credit, but when you’ll buy a house with good credit. And doesn’t that sound much better?

Regardless, choose the steps to buying a house with bad credit that are right for you. Now that you know how to buy a house with bad credit, how to raise your credit score, and some of the programs for buying a house with bad credit, you can turn your dream of buying a home into a reality.

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