Do you have a poor credit score but you want to buy a house? It is really easy to get that credit score lower, but not so easy to get it back up. Let’s face it; half your life is spent destroying your credit while the other half is spent repairing it.
So, what do you do when you want to get the house even with bad credit?
Here are 6 tips on how to get a house with bad credit:
1. Look at Your Credit Report
The first step in getting a house with bad credit is looking at your credit report. I know it is going to be gruesome, but so many people have found errors on their credit report that significantly affects their credit score.
You will want to get your credit report from all three of the National Credit Bureaus: Equifax, Experian, and TransUnion. You can get a free credit report from each Bureau every 12 months by going to AnnualCreditReport.
Check each of the reports to ensure all unpaid debt is actually yours. If you find something on your credit report that isn’t yours, dispute it. To do this, you need to tell the credit reporting bureau in writing that something on your credit report is wrong.
2. Consider a Credit Repair Agency
Credit repair agencies work to remove negative marks on your credit report by helping negotiate your debts, disputing inaccuracies, and lowering your debt to income ratio. Credit repair can take a couple years depending on how bad your credit is. However, you can also use online sources to help you do the same thing that a credit repair agency would do. Either way, it will take some time to get those negative impacts of your credit report.
3. Make Some Phone Calls
If you have had a few late payments, it can drastically affect your credit score. Even if you make 100 payments on time and only 1 late payment, your score goes down. If you want to get your credit score bumped up, you can do it in a small amount of time by making some phone calls.
As long as you are current on medical bills, credit cards, or loan companies, you can call the company and ask them to remove derogatory marks from your credit report. Not all companies will accommodate you, but many will especially if you are a good standing customer.
4. Save for a Large Down Payment
Most mortgage companies are willing to do a loan for someone with bad credit as long as they can get a large down payment from you. You will want to have $10-$20,000 down.
If you are living paycheck to paycheck it may be challenging to save for a new house, but, it is possible. Here are a few tips on saving for a large down payment:
- Live in a camper for a year. You can score campers pretty cheap and there are virtually no bills that go along with them, so your money can get chucked away.
- Live with someone. Ask a friend or relative if you can stay with them for a short period to save up money for a house.
- Cut back on extras. Don’t go to the movies, out to eat, or to get your Starbucks coffee every morning.
- Get a savings account. The best savings accounts are those that automatically save for you. You can set an amount to transfer every month so it comes out like a bill.
- Start a Gofundme page. Everyone is doing it, and it is a great way to get the money you need.
5. Make Payments on Time
If you make all your payments on time for a period of 12 months while getting rid of derogatory marks on your credit report, you can increase your credit score drastically. If you have a hard time remembering to make all your payments, set up an autopay so it comes out of your account at the right time every month. Keep on top of your finances and you will see your score improve.
6. Find Low Credit Mortgage Lenders
If you just don’t have time to fix your credit, and you need to get a house ASAP, you still have some options. You can find low credit mortgage lenders that will give you a home loan even with bad credit. However, you should be prepared to pay higher interest rates. The lower your credit score, the higher the interest will be.
You will want to get an FHA loan which means you will have to find lenders that offer this type of loan. An FHA loan is a type of mortgage that is insured by the Federal Housing Administration. They allow low down payments of 3.5% and credit scores as low as 500.
Getting a house with bad credit may not be an easy feat, but it is possible! How have you been able to get a home with bad credit? Share your tips in the comments below.