1. Find a good deal on your home
You can get started on the road to home ownership by finding a good deal on a home. You may want to consider looking into foreclosures or other ways to buy houses cheaply. This will not only lower the cost of the home and consequently your monthly payments, but it will also benefit you to have equity in the property when you go to get financing.
Lenders look at a particular number, known as a “loan-to-value ratio,” in addition to other factors like credit when you apply for a home loan. Home equity will give you a more attractive loan-to-value ratio that will make financing easier in many cases.
2. Creative financing options
Many times, there are alternative options available to help people with bad credit own their own homes. If you’re lucky enough to find them, some sellers offer seller financing and rent-to-own arrangements.
If that’s not an option, perhaps the seller would be willing to consider holding a second mortgage to help enable you to submit a higher down payment to the primary lender. A larger down payment will make it easier to get approved for traditional financing in situations where credit is an issue.
3. Down payment
While you see 100% financing ads everywhere, it’s not easy to get approved if your credit isn’t perfect. Every little bit you can save for your down payment will help lower your interest rate.
In many cases, it is even beneficial for you to wait to buy a home if you will be able to save more and come to the table with a higher out-of-pocket payment in the near future.
4. Compare mortgage options
When you actually go to apply for the mortgage, you’ll likely hear a variety of different responses and be presented with a variety of different rates and terms from various lenders. Ultimately, there will be some lenders that can help you while others cannot.
Among these lenders, the available interest rates and terms will vary. Looking for a better interest rate can save you a substantial amount of money over the life of the loan and is in your best interest. Fortunately, there are many online services that make it easy to find mortgage rates.
5. Credit Repair
Before applying for a mortgage, it would be in your best interest to take steps to understand and repair your credit score as much as possible. It’s easy to order your credit report and get your exact credit score.
It’s also a good idea to review your credit reports and look for entries that may be incorrect. You can then dispute incorrect items before applying for your loan. Even this small degree of attention to your credit before a loan application can ensure that you present your best possible credit score to potential lenders.
By following these simple tips, you should be able to give yourself the best possible chance of getting bad credit home financing.