We’ve all heard the countless horror stories from our friends with poor credit. A poor credit score can absolutely ruin your finances and any future plans you may have had; this includes your ability to buy a new home or car, and can even affect your ability to obtain a student loan to go back to school.
At times, having poor credit can seem like a financial death sentence; a trap that people are unable to escape. Fortunately, when looking to finance a home, there are some ways to get past your poor credit.With that in mind, here are some home financing options for people with poor credit:
Use A Larger Down Payment
One of the simplest ways to secure a loan is just simply placing a larger down payment on your house. A large down payment signifies lenders that even though you have a poor credit score, you are working on it and are currently in a financial position where you can afford to buy a new home and pay off its loan. Without a large down payment, lenders are simply going to look at your credit score and assume you are in financial ruin. Dispel any doubt they may have about your ability to pay back loans by offering up a large chunk of change.
Have A Cosigner
If your credit score is poor and you need an immediate fix, then you may want to ask a trusted relative or friend to cosign a loan with you. Having a cosigner allows lenders the assurance that there will be some way to recuperate losses if payments are not made. Unfortunately, this means that your cosigner will be liable if you fail to make payments. This method places more responsibility on you, because if you cant make payments on time then your cosigner is the one who will face the consequences.
See A Counselor
It may seem like a weird solution, but seeing a credit score counselor can be a big help in securing a loan. A credit score counselor can help you bring your credit score up or find lenders that will be willing to work with you regardless of your credit score. In addition, working with a counselor signals to lenders that you are aware of your poor credit score and are actively trying to fix it. This can be very important when trying to secure financing for a home.
Improve Your Score
One of the best ways to secure financing is to simply improve your credit score. As your credit score improves more opportunities and better deals open up to you. Before looking for home financing, build a positive credit history by paying your bills promptly. Although your past credit mishaps won’t be completely erased, as they get further into the past they’ll begin to matter less. As long as you continue to pay your bills on time you should be able to raise your score, and that will open up new opportunities to finance your home. The bottom line is that a good credit is important for anyone who is looking for a permanent place to stay, and not something like house-flipping loans. So what are you waiting for? Secure your future and open new financing options by improving your credit rating.
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Seems to me that this article belongs on another blog, for irresponsible people.
Well … this is the blog for responsible people — but I also strive to convert financially irresponsible folks into responsible ones too.
For example, the recommendation “have a cosigner” is in direct opposition to Len Penzo’s good advice:
https://lenpenzo.com/blog/id2121-100-words-on-why-you-should-never-cosign-a-loan-for-anyone.html
Correct … as my article points out, nobody should ever jeopardize their own credit rating by cosigning for a loan.
However, this article is for people on the other side of that equation. It is an entirely fair statement to say that people with poor credit have the option of finding someone who is willing to take a risk and cosign a loan for them.
Another option is simply bypass the traditional debt trap of borrowing and build your own home. Wife and I did that with our first small home, borrowing a small amount for materials over what we had saved…..had that paid off soon. Solid the house 7 years later, used the equity to build the current home debt free.