Don’t be afraid about buying a home with bad credit. It does not mean that if you have bad credit or filed for bankruptcy or gone through foreclosure means you cannot buy a house. Buying a house with bad credit is possible. But you’re going to pay more than a borrower with good credit because credit score is an important factor in the home-buying process.
It is not necessarily true that if your credit is tanked, buyers think they can’t buy a house. Even if buyers have poor credit, there is still hope for those who wants to buy a house. Let’s see how.
Waiting Period After Foreclosure/Bankruptcy
The ding to your credit report stays for 10 years and the outcome is bad credit. While the period between bankruptcy filings is about seven years.
You have to wait for four years after filing bankruptcy or short sale for better rates with matching loans.
FHA Guidelines are two years after a foreclosure, which means you could qualify for as little as 3.5% down. Three years with bad credit after a short sale. These guidelines allow for one year after a “qualifying” short sale, but lender overlays reject this notion.
Due to the bad credit of hard money lenders may require a 20% to 35% down payment and before making loans six months after filing bankruptcy. A lot will contain prepayment penalties and be adjustable because the interest rate will be very high and the loan terms will not be in their favor.
However, Subprime lenders rarely make 100% financed loans, even for bad credit.
How to Improve Your Score to Get a Conforming Loan
Even if you have bad credit that does not mean you are automatically disqualified from buying a home, that presumption is probably wrong. Make an appointment to a mortgage broker who is an expert in helping borrowers with bad credit yo buy a home. Don’t believe this misconception that you cannot buy a home with bad credit.
Get a major credit card. It is easier to get a major credit card after filing bankruptcy than you think. Here are three reasons: You cannot file for bankruptcy again for another seven years and the lender know you have no debt. Bankruptcy filing gives you a new start.
Show them you have a stable job for one to two years.
Earn a steady salary or wage (this does not apply to self-employment)
Save at least 10% for a down payment.
Do not fall behind on paying your bills. Avoid late payment.
Alternative to Bank-Financing
Borrowers might want to consider buying a home with seller financing instead of conforming lenders if they are not happy with the rate that is offered. Land contracts offer a viable alternative. Seller financing offers:
Lower interest rates
Flexible terms and down payments
If you want to refinance at a lower rate, you should check with your lender every year if you qualify.