“Put aside your fears. Just because you have gone through foreclosure, filed bankruptcy, or have had bad credit, it doesn’t mean that you won’t be able to buy your own home. The only difference over someone who has good credit is that you’re going to pay more,” says Elizabeth Weintraub (30 years in real estate industry practice).
The factors that will make it easy for you to purchase a home include a great loan, talented lawyer, and a good real estate agent to represent you. Don’t be intimidated with the process of buying a home with bad credit. It only involves the following:
Cleaning your record
Pay back your old debt and eliminate mistakes that might be present in your credit score. Although these steps will not immediately impact your home purchase, it might be put to good use in the future. Some Federal Programs or brokers will overlook your credit issues once you provide sufficient information, and or if the credit issue wasn’t your fault.
Seek financing from seller
If the seller knows you or trusts you, he can finance your loan right away. So instead of paying the bank every month, you will send your check to him.
Seek private party financing
You can also seek a loan from family members or private companies. If the seller is comfortable with this, then you can buy your home.
Check out Federal Mortgage Programs of FHA (Federal Housing Authority)
There are FHA loans available for those who are buying a home with bad credit or with limited funds. If you are approved for this loan, the points and rates may be lower. This is because FHA loans don’t place a very high premium for excellent credit unlike conventional loans. Also, you can be gifted with a down payment amount from a non-profit organization or a family member.
Get a co-signer with a good credit rating
Finding a co-signer is good if you have poor credit. When your co-signer agreed to sign, he is vouching that you have the ability to pay back the loan. Also, he is sharing the responsibility – if you fail to settle the loan, banks or other financial institutions can run after your co-signer.
Finally, in buying a home with bad credit “Always compare rates with lending institutions and several banks. You can also inquire special programs that would suit you or another association or bank that will work with you,” says Grace Bloodwell, principal of one real estate company.