We all dream of being the owner of a proud home. However, not everyone has the financial ability to own a house. That is why a lot of homeowners seek the help of banks and other financial institutions for financing options. With this, the bank pays for a major part of the price of the house, and the lessee pays this with interest.
There are requirements for being able to loan for a house and one of these is proving one’s ability to repay the loan. One’s credit rating is of utmost importance because having a high credit score, or having good credit, means that one has shown a history of being able to pay debts properly. If you have good credit, it is relatively easier to be approved for a housing loan, especially if you also have the necessary down payment ready.
Getting loans for people with bad credit is very challenging, which means that you had a history of not being able to pay your debts on time, or not being able to pay at all.
If you have bad credit, having your dream house is a challenge but is still quite possible. We have 5 tips for you on how you can still buy a house.
Here are 5 ways to buy a house even with bad credit:
1. Apply for FHA Loan
The Federal Housing Admission (FHA) has a loan that can help you buy a house of your own. If you have bad credit, the FHA loan will still help you purchase a house. Your credit score will determine how low your down payment is. If you have a low credit score, you would still be granted but you will need to shell out a higher down payment.
2. Get a co-signer
Getting a co-signer to guarantee your loan payment is another way you can buy a house even if you have bad credit. Your co-signer, though, should be in good financial standing and has a high credit score. Your bank would still consider your application despite you having a bad credit because they can make you co-signed secondarily liable for the loan. That means if you fail to pay, they’ll go after you co-signed
Crowdfunding can help finance a lot of things: hospitalisation, outreach programs, among others. You can also try to get crowdfunding assistance for a house that you’re aiming to buy. You will see that there are lots of people who are willing to help via crowdfunding.
4. Get a private mortgage
Sometimes, you are lucky enough to have wealthy siblings or cousins who are wealthy enough to lend you a hand and buy a house for you, but you will have to pay them. Your family and relative will most likely not charge interests over the amount you loaned from them. However, should you be unable to pay, you might cause feud within your family, so please make sure that you pay the right amount at the right time. With this, you will not need the help of any bank just to be able to buy a house.
5. Save a larger down payment
Even if you have a bad credit, banks would still consider your application. If you noted that you are ready to pay a larger down payment, then you might just be considered a house loan despite having low credit scores. High down payment gives banks the idea that despite a low credit score, which means that you were financially unstable before, you have money at your disposal now. This can serve as a good signal which can make your bank approve your application.
If you are prepared to pay a larger down payment but still got a no from the bank, then consider other options like getting an FHA loan as described in item 1. There are also other financing options but they would really provide lower financing so you would really need to set aside higher down payments.
The Bottom Line
Bad credit doesn’t mean the end of the road for your dream house. It’s a challenge but there are still ways on how you will be able to own a house with a bad credit. If you have bad credit, try to do as we suggested and see which one will best help you own the house you want to call your own.
On the other, if you do not have issues with your banks, then make sure to keep your credit scores promising. This will save you from a lot of trouble.
Finally, for those who don’t have much activity on credit scores, try to build your credit by using a credit card that you will have to pay off completely every month. Your credit rating will soon be increased thanks to your usage and payment.
For all, owning a house is a dream but let’s not keep it a dream very long and start actually owning one!