Many people are under the impression that if they have bad credit, there is no way they will be approved for a loan to buy a new home. Fortunately, that is not always the case. Here are a few of the ways you may be able to buy a new home when you don’t have perfect credit:
Pay more upfront.
Banks may be hesitant to trust you if you have bad credit, so it’s up to you to show the lender how serious you are about buying and paying for a new home. One way to do this is by offering to pay a larger down payment when you purchase the home. If you have a poor or fair credit score, paying more upfront will ensure you are seen as less of a risk to the lender. Plus, the more you pay upfront, the more equity you will own in the home, which is always a good thing.
Check your credit report.
You should always pull a credit report on yourself prior to meeting with a lender to see where you stand. If you have a surprisingly low score, it’s important to review the report to make sure there are no errors. Believe it or not, credit report errors are fairly common. In 2013, the Federal Trade Commission reported that one in four Americans found an error on their report that affected their score. If you do spot any errors, you will need to immediately contact the company that provided the incorrect information and ask them to fix the issue right away.
Show your stability.
Potential buyers who have low credit scores need to figure out how to make themselves look more attractive to lenders. For example, do you have a steady job that pays you a sizable income? Bring in your paystubs and show that you have earned a consistent income over the last year. If you are currently renting a home, ask your landlord to write a letter of recommendation that states you have never missed a payment or turned in a payment late. Even though you have a low credit score, the lender may be able to approve your application if you can show that you are an attractive candidate in other ways.
Search for a FHA loan.
It’s possible for a buyer with a credit score of 580 to get approved for a loan that is backed by the Federal Housing Administration (FHA). As long as you are able to put down a downpayment of at least 3.5%, you should qualify for one of these loans. It’s important to note that these loans typically come with higher fees, so be prepared to pay more in the long run with a FHA loan. Read 7 crucial facts about FHA loans
Now that you know how to secure a mortgage with less than perfect credit, are you ready to buy a new home in Observatory Park in Denver? Contact Elevation Realty
to be connected to a team of experienced real estate experts ready to help you on your home buying or selling journey.