Buying a house is a lifelong investment that can offer many benefits. If you have bad credit, however, the process can seem daunting if not downright impossible. Many people believe that bad credit has to keep them from their dream of buying a house, but this is not necessarily the case. With a little planning, research, and saving, anyone can purchase a home. Read on to learn more.
Buying a House with Bad Credit
Start by finding ways to improve your credit
Improving your credit takes time, but it’s never too early to start. Do everything you can to improve your credit score, including paying down old debts, consolidation loans to make them into a more manageable monthly payment plan, and religiously paying your balance each month. Your credit score will directly impact the interest rates you qualify for, so putting in an effort to improve your credit might save you significant amounts of money in the long run.
Look into federal and local lending programs
The Federal Housing Administration (FHA) provides loans that are available to people with lower credit scores in an effort to remove barriers to homeownership. FHA loans generally require a minimum credit score of 580, so if your score is lower than that you’ll probably need to go back to step one until you’ve raised your score enough to qualify. In addition, many local and state programs provide resources to connect potential homebuyers with resources to help them find loans that are available to people with bad credit.
Save up for a downpayment
Because your interest rates will be higher due to your bad credit, you’ll want to save up as much money as you can for your downpayment. While an FHA loan can be acquired with as little as 3.5% down (rather than the traditional 20%), in order to ensure that your monthly payments are manageable it is wise to save as much as you can for your downpayment. Having significant cash on hand for a downpayment can also make you more attractive to other lenders who may otherwise be shy about lending to you due to your low credit score.
Interested in buying or selling a Maryland home? Contact Residential Title and Escrow today!
At Residential Title & Escrow, we bring peace of mind to the settlement table. If you are searching for a title company to help you through the closing process, please contact us today! You can also fill out our simple online title request form and one of our knowledgeable representatives will get in touch with you promptly. Be sure to follow us on Facebook,Twitter, Pinterest, and Google+ to stay up to date.