Life is generally easier with good credit of 720 or higher at all 3 credit bureaus, Equifax (EQ), Experian (EX), and TransUnion (TU). It is possible to purchase a home even if your credit is less than stellar.
You might have to get a little creative and consider a few unconventional options, but there are options. Poor credit doesn’t have to mean a lifetime of renting.
Try these 8 strategies when thinking of buying your FIRST investment:
1. Speak with a mortgage broker. With a quick check of your credit and overall financial situation, you’ll get the advice you need to qualify for a home loan. Take the advice to heart and get busy making the changes they recommend.
2. Consider an FHA Loan. The government insures FHA loans. Banks love to make these loans, because they know they’re going to get paid, even if the borrower defaults. The eligibility standards are lower, and the presence of a foreclosure or bankruptcy doesn’t exclude your eligibility. The required down payment is also quite low at only 3.5%. The down payment can even be acquired via loan or gift from friends or family.
3. Use a co-signer. The right co-signer can have a significant impact on your ability to get a mortgage. It’s possible to get a lower interest rate, too. Remember that the loan will also appear on the co-signer’s credit report. Any late payments and other negative information could end up on their credit, too.
4. Have a large down payment. The more you can put down on the house, the more likely a lender is to overlook your lower credit score. The bank is much more comfortable loaning 80% of the home’s value versus 96.5%.
5. Purchase a home on contract. In order to get top dollar, there are home sellers that will sell their home to you and accept monthly payments for a few years. Some real estate investors use this tactic to sell all of their homes. Be careful of the terms. Ensure you understand what will happen if you are late with a payment. Look closely at the price and the interest rate. Purchasing a home this way can be expensive.
6. Lease to own. This can be a very effective way to purchase a home. Many sellers/landlords are willing to lease a property to you with the expectation that you’ll purchase it within a year or two. With a significant down payment, a portion of a higher than market rent can be applied as the down payment when it’s time to buy. This way, you can purchase a home for a fair price and you’ll have a couple of years to get your finances in order. Real estate agents and tired landlords are good places to look for these kinds of properties.
7. Do your best to clean up your credit. Take time to challenge any incorrect or negative information. Pay down your credit card balances until they’re less than 30% of the credit limit. Have several months of on-time payments for all of your debt accounts and your utilities. Just a few months can make all the difference. Your mortgage lender can possibly do a rapid rescore for a few hundred $$ if you want to speed up the process.
8. Increase your income. Many of the factors that go into a mortgage approval decision revolve around various financial ratios. Decreasing your debt is one way to improve these ratios. Increasing your income is the other. Consider searching for a higher-paying position or pick up a part-time job.
Having poor credit doesn’t mean home ownership is out of the question. Explore all of your options and make the effort to correct your credit situation as much as possible. Contact a mortgage broker and get some expert advice on how to improve your chances. It’s possible to purchase a home, even with credit challenges.
If you want to find out more, reach out to us at https://www.LesliePurdy.com or text/call (321) 209-INFO(4636).
About Leslie Purdy, Real Estate ProfitabilityTM Author, Mentor and International Speaker
Leslie Purdy is a third-generation real estate investor with a lifetime of experience. She and her husband have actively been repairing, rehabbing, and working in real estate for more than 40 years. They are seasoned investors who have made it through all the ups and downs of the real estate market and grown their net worth exponentially.
If you want to find out more, reach out to us at http://www.LesliePurdy.com or call (321) 209-INFO (4636.