Home loans do exist for people with poor credit. But they’re not easy to find. Usually some solid demonstration of financial improvement needs to be seen by a lender. Following are five tips on how you can improve your chances of getting a loan if you have bad credit:
- Save for a Down Payment- With a low credit score, it still may be possible to get a low down payment loan. However, the higher a down payment, the more likely you’ll get the funds.
- Improve Your Credit Score- This is easier than it may appear. For starters, you can visit all of the websites of the three major credit bureaus to correct any mistakes. Make sure you pay current payments on time and reduce your number of credit inquiries. Refrain from buying a car, applying for credit cards or any other loan while you’re buying a house.
- Good Real Estate- Try and find some property with equity in it when you purchase it. To a lender it may even represent a type of down payment on the property.
- Creative Financing- An example of this would be to see if the seller would be willing to take a second mortgage on the house. Then you pay monthly payments including interest on a portion of the property. You might want to suggest the total amount is due within three years or so. This might help persuade the seller.
- Check all Loan Sources- You might hear a banker or broker say that if they can’t help you, no one can. However, the reality is that lenders vary so much it’s worth your while to shop around to several brokers or submit one application to several brokers.
While it might seem difficult to find a poor credit lending source, they do exist. Here are a few options:
Your eligibility for an FHA mortgage might help you if you have poor credit. To quality for one consider how the items below apply in your situation:
- Any bankruptcy must be 2 years old and the applicant must have demonstrated good credit for 2 consecutive years after the bankruptcy was filed
- A foreclosure has to be at least 3 years old
- 3 consecutive years of good credit must follow
- You need 3 years of stable income and
- You have to be able to prove you pay all of your bills
If you’re a veteran or qualifying military personnel you can check your eligibility for a VA loan. If you’ve had a bankruptcy that’s 2 or more years old, but have reestablished your credit with a clean payment history over the last 12 months, you might qualify for a VA loan.
Sub Prime Mortgages
Some lenders will still do sub-prime loans like home equity, second mortgage or fixed rate refinancing.
Right now, though, the reality is that most loans for people with poor credit go through the FHA or VA so the lender can get insured on it.
More information on Bad Credit Loans
Excellent sources of government information on bad credit loans are:
The Department of Urban Housing Development: http://www.hud.com
The Federal Housing Authority Page: http://portal.hud.gov/portal/page?_pageid=73,1&_dad=portal&_schema=PORTAL