Best Guideline For First Time Home Buyer Programs With Bad Credit History

Best Guideline For First Time Home Buyer Programs With Bad Credit History

Posted on

Today in this article we will be discussing how to buy a home for the first time when you have a bad credit history. You surely know that having a bad credit history can directly affect you to purchase a house for the first time. You might face various types of problems especially when you have bad credit history. Banks and lenders do not prefer to provide loans to those people who are having a bad credit history.  The credit history is considered to be fair when it is between 580 and 660 as stated by FICO. But it will surely be considered poor when it is from 500 to 570. Apart from that there are different views of the lenders, some lay great importance on the credit history and some only focus on your current income capability. When your credit history is bad, you can simply prove to the lender your current income sources so that they find you financially stable. Lenders surely want their money back; therefore they lend money to only those who meet their requirements.

You should simply understand that there are mainly five categories of credit score that can easily define your financial condition.. Therefore it is important for you to check your status as the credit union makes the report on the basis of your credit behavior or transactions. Check out the list below to get comprehensive information about the credit score.

  • Below 500 – If your credit score is below 500 then you should understand that it is in bad condition and none of the lenders will be interested in lending any money to you.
  • 501-600 – If your credit score is between 501 to 600, it means you have a poor credit condition.
  • 601-660- When your credit score is between 601 to 660 then it can be considered to be quite fair and it means you have the capability to repay the lender’s amount.
  • 661-780- When you have a credit score between 661-780 it is considered to be a very good score and the lenders will be interested to lend you money as you have full capability to pay the money back.
  • 781-850- If your score is from 781 to 850 then this is considered as an excellent credit score and you will have no difficulty in getting loans from any lenders or banks.

Ways To Follow When You Are First Time Home Buyer With Bad Credit

Do not worry if you have bad credit as there are various sources like banks and lenders from where you can easily get loans. The lenders or banks surely offer various types of offers.

It is important for you to research a bit and know about the lenders that are offering loans to first time home buyers with bad credit.

Search for Lenders For Whom Bad Credit History Do Not Matter

You might have some basic knowledge about the lenders who offer you a loan when you are planning to buy a home for the first time. There are a lot of lenders who mainly give high importance to your credit history but there are also other types of lenders for whom bad credit history does not matter at all. But it is always recommended to maintain a better credit score so you will be able to easily get loans. Therefore it is important for you to look for lenders who are willing to offer you loans even if you have a bad credit history. These lenders mainly give importance to your current income and capability to pay back the loan. There are also various lenders who offer mortgage loans at an affordable rate.

Read HereGet Loans for People with Bad Credit & No Bank Account

Search for First Time Home Mortgage Lenders

If you are a first time home buyer and have bad credit then there is nothing much to worry as you can surely get mortgage loans from various lenders. These lenders mainly run mortgage programs for those people who are first time home buyers and their credit score is poor. It is always important to look at your pocket before making a big decision like buying a house. You might not have enough money to get a house and therefore you are forced to look at various options so that you can easily get the house. Lenders mainly prioritize the first time home buyers and the process is quite simple. You can surely find different lenders that are offering loans when you are planning to buy a house for the first time. You need to research a bit and search for those types of lenders online or from your relatives and friends.

Check The Mortgage Rates

It is very important for you to check out the mortgage rates and choose the suitable one for you. There are various banks and lenders that offer very low mortgage rates to the first-time home buyers. Do not worry if you have a bad credit history as they also provide mortgage loans at a much more affordable rate.

So, it is vitally important for you to know about the market rate and then gets started with the process. Sometimes the rates are very high, so it is important for you to research the market and find the best mortgage rates. You can also try to discuss the mortgage rates with a real estate attorney and produce all the required documents.

FHA Loans

FHA stands for  Federal Housing Administration, they offer various types of plans to the first time home buyers. Your credit score does not matter but you should surely have detailed information about the government process to get a loan if you are a first time home buyer. You can easily get a loan from the government as the process is quite simple. Therefore it is better for you to go for FHA loans. You do not need a good credit score to get the loan but you must have a credit score more than 579. Another great thing is down payment for the first time home buyers and they only charge around 3.8 percent that is quite a decent deal.

How To Find Lenders When You Have Bad Credit History

There are surely a number of ways that will help you examine your credit score. There are some lenders who do not give high importance to your credit history. But certainly there are many lenders who mainly focus on your credit score and if they find if you have a low credit score they will surely back out. Things get more difficult when you are bankrupt and you go for mortgage loans. In such a situation the lenders do not approve any loan as you are bankrupt and you do not have the capability to pay the loan back. So, you are required to wait for  a minimum of  two years after getting discharged from bankruptcy under chapter 7. In chapter 13, it has already been stated that it is mandatory to wait for the first twelve months after bankruptcy to get any mortgage loans. But do not worry there are some specific places where you can find mortgage loans.

Read HereCiti Credit Limit Increase – Hard Or Soft Pull – Getting Started

Working in a flourishing company

It is also good to join a company that is growing and flourishing that will surely benefit you when you are having a bad credit history. The lenders will surely be impressed by your job and will be willing to offer the required loans. It is always important for you to fulfill the requirement of the lenders to get approved for the loan. When you are an employee of a reputed firm you will surely get mortgage loans from various banks and lenders. Employees from reputed firms are considered highly valuable by the banks and therefore you will have no trouble in getting mortgage loans. So, if you are having a bad credit history do not worry as you can easily get it when you are an employee of a growing firm.

Save On Hand

When you have a bad credit history, do not worry as there is a simple trick that will help you in getting a loan to finance your new house. But the reality is that the middle class and lower class families do not make any plans on their spending. Whenever you are going to invest big, it is highly recommended to keep some extra money in your hand that will be of great use. The cash on hand will surely benefit you to get a mortgage loan from any lenders or banks and you will be able to buy a new house.

Therefore it is recommended for you to build a plan to save the extra money. So, when you have extra money in your hand it will be easier for you to get the loans approved by the banks or lenders. The banks or lenders mainly identify your capability to repay back the loan at the right time.

Higher Down Payment

It is always recommended to make a higher down payment so that the lenders completely rely on you and think that you will be able to pay back the loan amount. However, it mainly depends on the banks and lenders who are providing you the loan amount. When you are eyeing to buy a house it is recommended to pay a higher down payment. So, when you are having a bad credit history higher down payment will surely work for the lender or banks. You can also increase the deposit amount as per your choice. Most of the lenders are highly convinced when you make a higher down payment. So, if you are having a bad credit history you should surely keep some extra funds that can be used while making down payments.

Service Length

It is also important for you to have a stable service from where you are generating regular income. Most of the lenders provide loans to those people who have joined a reputed company permanently. The people who are in temporary jobs are not favored by the lenders and therefore they might not get the loan approved. If you are working more than 6 months in a company then it will be easier for you to get a mortgage loan.  So if you are a permanent employee who has a good source of income you will surely get the loan even if you have a bad credit history. The banks and other lenders surely think that you have the capability to pay back the loan when you are into a permanent job.

Debt to Income Ratio (DTI)

Another main factor is the debt to income ratio that is followed by the lenders when you are applying for FHA programs. The main thing you are required to know is an overall calculation on your monthly income and your monthly expenses. You should also know that there are mainly two types of debt to income ratio that is the Back End DTI ratio and the other is the Front End DTI ratio

The Back end DTI ratio is calculated after spending the amount on the mortgage. Whereas the Front end DTI ratio shows the income or debt that is before adding any mortgage loans in the account. You might have opted for different kinds of loans from different lenders or banks. It can be a car loan, student loan, home equity loans, credit card debt loan and many others. The debt ratio is highly valuable as it shows how much amount you have spent from your overall income. When you are earning around $5,000 and paying a debt that is around $1000 then your debt ratio will be 20 percent.

Also, remember that the lenders always prioritize lower debt ratios. So, when you are having a lower debt ratio the lenders will be surely attracted and will approve mortgage loans even if your credit history is not that appealing. You can also try to collect proof of the debts you have repaid and that will help the lender to understand your capability to pay back the debt. If you have paid the dues on time then you will have no problem in getting mortgage loans. So, do not worry as your credit history does not matter much.

Ways To Build Good Credit History

It is always recommended for you to improve your credit score which will surely help you a lot in the future whenever you are looking to get any type of loan. So, if you are having a bad credit score do not worry as there are several ways to improve your credit history. It is important to improve your credit score when you need a loan to buy a new house. A few steps have been mentioned below that will surely help you out.

Use the Credit Card For Yourself

The problem is that most of the family members have a credit card that can be sometimes dangerous. The individual who is earning and paying the credit card bill should only use it as he or she knows better about their income. When someone else is using the credit card, they might spend money on useless things and that might put you on an extra financial burden. You should also maintain a good balance between your income and expenditures that will surely make you financially strong. Therefore you should be very careful while using a credit card.

Apply for a Secured Credit Card

If you are having a bad credit history then it is important for you to make a good plan before buying a house. So, getting a secured credit card will surely improve your credit score. The good thing about a secured credit card is that they will help you to make payments at the right time before the due date. But to get a secured credit card you are required to deposit an amount. So, in this way you surely wave off all the risk and will be able to pay the dues at the right time.

Maintain A Single Account

You should not open different types of credit accounts as things can get really difficult for you. So, it is recommended for you to maintain a single account that will help you in improving your credit score. If you have multiple credit cards you might fail to pay the dues and that will surely affect your credit card score. Always remember that it is vitally important to pay the credit card dues at the right time. So, opting for a single credit card is better for you. You should only get multi credit cards when you have the capability to pay all the card debt at the right time or else you should not go for it.

Always your credit score

You might be spending a lot of money from your credit card and therefore it is important for you to check the report of every transaction related to spending and repayment. In the report you can surely view your credit score. You should generate your report on each interval and therefore you will have a proper track of your spendings and repayments. It is always vital for you to know your credit score as it matters a lot.

If you feel that your credit report is bad, you can surely track your spending and minimize it. As you surely know that a good credit score will surely help you in the future to get any kind of loan. Therefore it is very important to eliminate bad credit and follow these steps to maintain a good credit score.

Don’t reach the credit limit

Every credit card has a limit and you should never hit the credit limit  as things can get more difficult for you. Reaching the credit limit of your card can affect your credit score. If you have a credit limit of $700 then you should not spend more than $600. In this way you can surely improve your credit score. The credit union will surely report your credit score.

Conclusion

I hope this article has provided you with all the required information on how to buy a house with bad credit. However, you should always remember that the lenders and banks have their terms and conditions. It is vitally important for you to meet these terms and conditions to get approved for mortgage loans. There are lenders who do not give much importance to the credit score when you are financially stable and have the capability to pay back your debts. But remember you should surely try to improve your credit score and it will help you to get loans quite easily. If you know someone who is looking for such loans please share the article with them. I hope you have a great day ahead!

Frequently Asked Questions – FAQs

In this section we are going to answer some of the most frequently asked questions on getting a house with bad credit.  Go through the questions and answers to get additional information on the topic

Is it possible to get a loan from lenders when you have a bad credit history?

 
Yes, it is possible to get a loan from lenders even if you have a bad credit history. However, you have to research a bit and find lenders who do not give much importance to your credit history. There are also other ways to get a loan when you have a bad credit history.

How can I improve my credit score?

There are several ways to improve your credit score that will help you to get loans easily. It is highly recommended for you to use the credit card personally and keep on checking your credit card report. It is also important for you not to reach the credit limit of the card. These are the few ways you are required to follow to improve your credit card score.

Leave a Reply

Your email address will not be published. Required fields are marked *