Bad Credit? Don’t Give Up on Homeownership Just Yet
When unexpected emergencies come up, it can be difficult for many of us to get back on track. Paycheck-to-paycheck situations often make it nearly impossible to plan for out-of-the-ordinary expenses, and when things start to fall behind, it can severely impact one’s credit score. What’s even more unfortunate is that situations like this can place one’s financial future in jeopardy and make buying a home a difficult task to accomplish. However, there are programs available that offer assistance to individuals who have bad credit no matter what the cause.
Who To Work With
Most of the programs available for buying a home with bad credit are backed by the government, and while you still need to meet certain qualifications, they aren’t nearly as strict as other traditional routes. In many cases, programs like FHA or USDA require a credit score of around 580 or higher, which is far lower than most, but it still requires that some of your ducks are in a row. Many of these programs require little or no down payment as well, which further helps individuals to qualify to buy a home, be it in Leesburg or elsewhere.
Others with scores lower than 580 aren’t out of options entirely, as some utilize a rent-to-own type of agreement. Essentially, a homeowner will rent out their property to a person with a specific contract in place. The tenant will agree to pay rent for a certain number of months at a set price, and then will have the option to purchase the home after their lease is over.
Rent-to-own scenarios can look a lot of different ways in terms of the purchase price and the money that’s used to secure the property, so be careful when entering into these agreements and make sure you fully understand what you’re committing to.
Improving A Credit Score
If it’s still difficult to get approved for a mortgage due to a lower-than-desirable credit rating, there’s always the option of making steps toward boosting your credit score and trying again later. Working to improve your score takes a lot of time and diligence, so it’s not a quick fix when it comes to home buying.
There are several recommendations for improving one’s credit rating, with the most obvious one suggesting that all creditor payments are made on time. Making only the minimum payment will suffice in keeping creditors happy, but if the goal is to buy a home sooner rather than later, paying larger amounts toward your balances can be a great way to go.
Be careful when taking out new lines of credit as well, as this can sometimes suggest a cash flow problem if many credit cards are taken out at once. Also, pay attention to the balances on your cards—having several maxed out accounts can be another red flag to lenders.
Homeownership Is Possible
At the end of the day, having bad credit isn’t a kiss of death in the mortgage industry, but it may result in higher than average interest rates or being approved for less money than you’d originally hoped for. If buying a home isn’t absolutely necessary, try taking some time to boost your credit score and see how it affects your approvals down the road.