If you do not have a good credit score, you might feel like home ownership is not possible for you. However, every financial situation is unique, and there are still some avenues you can pursue if you want to own your own home, especially if you have the financial stability to do so.
Many people with poor credit have good jobs, plenty in savings, and a steady income; the low score comes from past financial decisions or unfortunate circumstances. You also might not have great credit if you do not have a long credit history. Young buyers often struggle with reaching a good credit score simply because they haven't had much experience with loans or credit cards.
Here are some options to consider if you're hoping to become a homeowner but your credit stands in the way.
1. Contact a mortgage broker.
Instead of approaching individual lenders yourself and getting rejected for traditional loans because your credit is not high enough, try reaching out to a mortgage broker at a company like Cornerstone Residential Mortgage. Brokers work with lenders to find the right loan fit for you, helping you to get lower interest rates. Your broker can also help you look into unusual lending situations, such as purchasing a foreclosed property or dealing with a short sale, which might help you if you have plenty of capital to offer. Your broker can also let you know about available state and federal lending programs with more lenient credit requirements. For example, some FHA loans are approved for applicants who only have a 580 (or sometimes lower) credit score, provided the applicants meet other requirements for the loan.
2. Reach out to a co-signer.
Some lenders will not budge on their credit requirements, no matter how rosy things look in your bank account. You might consider reaching out to a friend or relative who is willing to co-sign the mortgage. Many people may not be willing to do this because a mortgage is a huge financial commitment, but you may find someone willing. For example, a wealthy parent may be willing to co-sign a mortgage for a young adult child who has a history of financial responsibility. If you have a person in your life who your trust and who trusts you, you might meet with a real estate attorney about the pros and cons of co-signing a mortgage.
3. Increase your downpayment.
Many times, lenders will be willing to entertain lower credit scores if the applicant has significant amounts of money for a down payment. You might not qualify for programs that require only 3 or 5 percent down, but if you offer 25 or 30 percent (or more), you'll be less of an investment risk for the lender. If you have trouble putting up that much money for a down payment, consider lowering your overall purchase budget so that your saved down payment goes further percentage-wise.
4. Make yourself an appealing buyer.
After all is said and done, you might not be able to get a loan with your credit score. If this is the case, you can put in some work to make yourself a more appealing buyer, and then you can try again in a few months. You can:
For more information on how you can get into a house as soon as possible, contact a local mortgage broker.
Share23 May 2018
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