When you have bad credit and need help buying a house, you may be wondering how to get started. There are several options you can consider. These include a co-purchaser, a large down payment, or a conventional loan. You should carefully evaluate all the options to find the best one for you.
Co-purchaser
Co-purchasers, also called co-borrowers, are people who will co-sign the loan with you to help you buy a house. You don’t need to live together, but a co-purchaser will make it easier for you to qualify for the loan. The ideal co-borrower is someone who makes a good income with a low debt ratio and a solid credit score.
Large down payment
When you have bad credit, it can be difficult to obtain a mortgage loan. However, many lenders are willing to give you a shot if you can make a substantial down payment. A down payment lowers the risk to the lender because it shows that you have invested your own money in your new home. This makes you more likely to make payments on time.
Conventional loan
Although bad credit is a huge roadblock when it comes to buying a home, there are a number of ways to overcome it and still get the financing you need to buy a home. For example, you can use government-backed programs to purchase a home with a low interest rate. You can also check with local community development organizations for resources and help.
Personal loans
There are several options for bad credit borrowers who are in the market for personal loans to buy a house. There are direct personal loans available from local banks and credit unions, and online lenders. These loans require no collateral, and the repayment terms are typically two to seven years. Secured loans, on the other hand, require collateral and include mortgages, auto loans, and home equity lines of credit. If you have a poor credit history and need money for a large purchase, a secured loan might be the best option.
Improving your credit score
Improving your credit score when buying a home with bad credit is not a difficult task if you follow a few simple guidelines. One of the first things to remember is to make sure that you pay off your credit cards. This is one of the most important factors in the credit score. Credit utilization is about 30% of the total score, so it’s important to keep the balance below 30%. The lower the percentage, the better for your mortgage application.
