Part of the American dream is to own a home. It's also the biggest thing most of us will ever buy, so almost all of us will have to borrow money to pay for it. Unfortunately, this means that many people need a bad credit home loan, which can be hard to get.
It's easy. Imagine asking a bank for $200,000 in cash. Then imagine that your credit is bad. You never pay your bills on time, your credit cards are maxed out or you don't have any, and you have no collateral. Now think about what the bank might say.
A big part of the American dream is to own a home, but a big part of the American reality is to have bad credit. Many people with bad credit want to buy homes, but it's clear they've never been able to pay their bills on time. How can they convince a bank or other lender to give them money when it's clear they've never been able to pay their bills on time?
If you want to buy a house but have bad credit, the first thing you should do is try to get it better. Make sure your bills are paid on time. Get a major credit card if you don't have one, use it, and pay your bills on time. You are trying to show a lender that they can count on you to pay back the money you have borrowed. Next, you should take a close look at your credit score.
Your credit score is a record of all the credit-related things you've done in the past. It shows how much you've borrowed, how often, and how quickly you've paid it back. Credit scores are made by three companies: Experian, Equifax, and TransUnion. Each of these companies will give you one free credit report a year. If you want to borrow money for a house, you should look at your credit report. It's possible that there are mistakes on there that could hurt your score.
Now, let's say you're getting close to having credit, but not quite there yet, and that your credit report is correct. The next step is to find someone who will lend you money, which is probably the easiest step of all. Since so many people in the U.S. have bad credit, mortgage companies have made it easier to get a loan, and almost all of them have special programmes for people with bad credit. These people aren't giving the money away, of course. You will still have to fill out an application, and they will look at your loan-to-value ratio, debt-to-income ratio, and monthly income to decide if you are a good risk or not. But don't forget that if a mortgage company is willing to talk to you even though you have bad credit, it means they want your business, so don't be afraid to negotiate.
But what if the banks and private mortgage companies say no? Have you tried everything? In no way. Even if you have bad credit, there are many ways to get money for a house. The Federal Housing Authority is a good place to start (FHA.) FHA loans have very good terms. The down payment can be as low as 3 percent or less, they will help people with bad credit, and they have a number of programmes that give great deals to professionals like police officers and teachers to encourage them to buy a home in the community where they work. Fannie Mae is also a good choice. Through their Expanded Approval Program, this private company makes it easy to get home loans, even if you have bad credit.
Getting a home loan with bad credit can take more time, but it's worth it. There are a lot of options and the interest rates are low. Don't put off your goal.
