Are you trying to figure out how to buy a home with bad credit? Or maybe you’ve let a sub-par FICO score discourage you from even trying to pursue your dream of owning your own home.
Well, take heart because there’s good news for you.
Buying a house with bad credit might not be as easy as it would be with an excellent FICO score. But you have a good chance of achieving your goal if you work with a knowledgeable home loan expert and explore these insider strategies to see which ones might work for you.
No. 1: Explore Alternative Home Loan Programs
Although many conventional home loan programs do require a higher FICO score, FHA, VA and USDA loans can help buyers with compromised credit get into their dream home. Not everyone qualifies for these types of loans, so talk to a knowledgeable mortgage broker to learn more and determine whether one might be right for you.
No. 2: Choose a Mortgage with a Higher Interest Rate
Lenders view a potential borrower’s bad credit as a sign of increased risk. By charging a higher interest rate, however, it helps offset their risk. If you’re willing to pay more over the life of your loan, this could be the answer you’re looking for. And, after a few years – once you get your credit score up and build equity in your home – you can get a mortgage refinance loan to lower your rate.
No. 3: Put More Money Down
When the lender can have a more favorable equity position in the mortgage, they may be more amenable to extending a home loan to a buyer with bad credit. When you bring more cash to the transaction (or utilize a down payment assistance program), lenders can often reduce their risk enough to approve your loan.
No. 4: Use a Co-Borrower
Consider applying for your home loan with a trusted family member or partner who has a stronger credit rating. This is a great way to get into a house and build your credit while still getting more favorable loan terms. It’s important that you discuss the arrangement in detail before moving forward. You should also seek advice from a legal expert and put your agreement in writing, to help avoid any future problems.
So, which of these options may be best for you? Talking to an experienced home loan professional is the most reliable way to explore your options. In Orem and throughout the Salt Lake City area, Intercap Lending has the knowledge and experience you need. We are committed to finding the best possible loan program for you, and guiding you in the right direction to achieve your goals.
Contact us today to learn more about how we may be able to help you buy a home with bad credit.