Do NOT think that you won’t be able to get a home loan without good credit. People do it all the time, all the while improving their finances and getting back on track. You may have to pay more interest, but by no means do banks turn away every prospective homebuyer with less-than-stellar numbers. Here are three tips on how to get a loan for a house with bad credit.
1. Quickly Improve Your Credit
Obviously this is not a step for people still in dire financial straits. However, if your bad credit is only an indication of your past transgressions, you should do all you can NOW to make your credit score reflect your current financial responsibility.
First of all, negative marks on your credit report expire after seven to ten years. If you’re close to that mark, then your credit will rapidly improve. Second, you need to get rid of your debt as quickly as possible – live below your means and pay things off NOW. The less of your available credit you are using at any one time, the better.
2. After Bankruptcy
Even if you have declared bankruptcy, there are things you can do to secure a home loan with poor credit. Firstly, you’ll need to maintain steady employment for two to three years. You won’t be able to jump right into a home loan after this drastic step, but you can definitely improve your credit score and your situation.
In one way, a bankruptcy can be positive, in that your potential lender knows you have no more debt. That lack of debt, combined with a few years of serious financial responsibility and good credit-building can help you get back on track and in your new home.
3. Save a Large Down Payment
In addition to paying off every piece of debt you can, you should be prepared to put as much money down as possible. This will allow you to secure a lower interest rate, even with bad credit. It will also allow you to make lower monthly payments without racking up greater charges. When banks see you ready and willing to put serious money down up front, they are more willing to forgive your earlier financial mistakes.
