Sunday, 9 February 2020

Can You Buy A House With Bad Credit

Today I'm going to answer the question can you buy a house with bad credit? But I'm also going to give you the tip you need to make sure your credit isn't the issue through your home buying process.

Can You Buy A House With Bad Credit?

The answer is "yes" but the real question is, do you want to buy a house with bad credit? I know you may be saying to yourself, yes you do because you may want to leave the apartment that you're at, or you may be staying with your parents until you get your stuff together so that you can go ahead and buy a home, or maybe you're renting a home and you're tired of paying somebody else's mortgage and you want to go ahead and get your own house. Either way, it goes, you really want to think about if you want to try it, go ahead and make that leap while your credit is still in a bad condition.

But the truth is, the very best option that I can tell you on getting a home loan with bad credit is going to be an FHA Loan:

  • FHA Loan: Minimal Score 580 / 3.5% Down Payment
  • FHA Loan: Score Below 580 Pays 10% Down Payment

FHA allows you to get a home with a credit score of 580 or better and still have a 3.5% down payment, which is very good, but if your credit score is lower than a 580, you're going to have to pay 10% down payment and don't be fooled, you're also going to have to pay extra in interest because your interest rate is likely going to be higher because of your credit score. And there are also some other extra stipulations that you're probably going to have to go through with the lower credit score. But, it is true, you can still get a mortgage with a low credit score. 

Debt To Income Ratio Qualification (DTI): Monthly Dent Payments/Gross Monthly Income

There are some other things that are going to come into factor as well, which is going to be a debt to income ratio. Even if you get approved with the loan with your low credit score, you will still have to meet a debt to income ratio qualification, which is the percentage that you have to meet with your income compare to the debt that you have to payout. Even if you get approved, credit score-wise with the low score or the debt and everything that may be accumulated on your credit report that is causing your score to be so low has to be included as a payment in your debt to income ratio. So any debt that you have from your credit can cause you to still get denied even though you got approved with the low score and like I said it can turn around and still affects your debts to income ratio and cause you to get denied.

3 Tips To Buy Home With A Bad Credit.

I told you I was going to give you some tips that are going to keep you from having your credit stop you or mess you up in the process of buying home. I'm going to give you 3 tips that are going to help you out with that.

Tip 1: Get All 3 Credit Reports

You need to get all your credit reports and scores, the score, so you can have a reference point to where you may be, the credit reports so that you can see what's on your credit report and you can see what you need to work on. if you don't know where to get your credit reports, check those articles below.

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Tip 2: Get A Credit Card And Keep Balance Under 30% Of The Credit Limit

Get a credit card if you don't have one because credit cards boost your score faster and they also give you more points than getting a loan or any other type of credit. So you want to get a credit card if you don't have one. If you already have credit cards, what you're going to do is you're going to want to pay down all of your balances on all the credit cards to under 30% of the credit limit. The reason why you're doing that is that 30% of your score is affected by credit card balances. So that's why getting them helps your score a lot and paying them down can boost up your score a lot in a short period of time.

Tips 3: Identify third Party Collection Accounts On Your Reports.

When you are looking at your credit reports you want to identify any third-party collection companies that you have on your credit report. And these wouldn't be the original creditor, they would be the original creditor handed it off to the company, so any third-party collection companies that you have, you don't want to pay them off, you want to get them removed from your credit report. Because that's the only way that you're actually going to see improvement in your score when you pay them off, it actually doesn't help you score, you don't either keep it the same or it'll drop your score. So how do you have them removed from your credit report? Well, you have to look at them to see if you have any obvious errors and then you want to dispute those the right way, in the right way, aren't online disputes, you want to mail letters when you send disputes.

May have heard of people getting success from online disputes, but I promise you it only happens for a few people it's not very successful for everybody. If you don't see success through the disputing method and you end up having to pay them, you want to do a pay for deletion where you offer to pay them a certain amount of money only if they remove it from your credit report. You want to negotiate this before you give them any money because once you give them money you have no leverage at all. Pay for delete strategy when you're trying to get those accounts removed from your credit report because like I said, that's the only way it's going to benefit your score.

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