By Mike Stotz, Mortgage Loan Officer
Are you worried that you won’t be able to purchase a home because of bad credit? A big misconception of potential homebuyers, especially first-time homebuyers, is that you have to have good credit or fair credit. This is false. It is possible to purchase a home with bad credit, but there are a few things you’ll need to consider.
Here are the three necessary steps you should take to purchase a home with bad credit.
Check Your Credit
There are several sites out there that will give you a free copy of your credit report, like Equifax or TransUnion. You can also contact one of our experienced loan officers, who will not only check your credit and review it with you, but they will also be able to discuss what loans you are eligible for based on your credit profile. Be sure to check for errors and accounts that are reporting you as behind or delinquent and address those issues first.
Consider an FHA Mortgage
FHA mortgages are extremely popular among first time homebuyers. This program requires a down payment of 3.5% and a credit score of 580 or higher. As with any program, there are pros and cons of an FHA mortgage. Check out our blog post, 4 Facts About FHA Loans to learn more. Be sure to discuss this possibility with a loan officer so that you are familiar with the requirements.
Create a Plan
Perhaps you are not quite ready to purchase a home right now. Come up with a plan with your loan officer and discuss what needs to be done and what steps you can take so that you are ready to purchase in the future. This could include paying off or paying down debt, saving more money for a down payment, paying off and removing delinquent trade lines from your credit report, or having a family member co-sign with you.
The most important thing to remember is that it is best to address your credit blemishes head on. Ignoring them will not make them go away, and in most cases, will only make them worse. Your credit report will contain contact information for any creditor past or present that you may owe money to. In many cases, these creditors are willing to work with you to get your account current or to resolve a dispute. Be sure to keep a paper trail of any correspondence you receive as it will be needed during the underwriting process.
Contact our team of loan officers to get started.