How to Purchase a Home When You Have a Bad Financial Record

Debbie Warford
Debbie Warford
Published on June 28, 2021

How to Purchase a Home When You Have a Bad Financial Record

Are you looking to buy your first home? Is your financial record less than ideal? You may have options. Sure, it’s easier to get a good mortgage when you have a solid credit history and a high credit score. But there are ways that you can purchase a home if you have bad credit, as long as you’re willing to make concessions and/or be patient.

Whether you’re hoping to land a deal on a repossessed home or purchase a newly-constructed house, it’s important to know what your options are so that you can develop a good plan. Consider these tips for aspiring first-time homeowners with bad credit:

Find a great real estate agent.

One of the first steps you should take is to find an experienced real estate professional like Debbie Warford of Home Solutions Realty. Not only can they help you find the perfect home for your lifestyle and budget, but they can help you through pretty much every other step of the homebuying process. This includes helping you compare mortgages, negotiating purchase prices and repairs with sellers, handling the closing, and many other things along the way.

Start resurrecting your credit.

As you’re figuring out how to buy a home with your bad credit, work toward building up your credit in the meantime. Start by getting a credit report from each of the three credit bureaus (e.g., Experian, Equifax, TransUnion, etc.), and thoroughly assess each one for any errors that you need to dispute.

If you have a substantial amount of debt, be sure to make your payments on time. Paying your credit card bills, as well as all of your other bills, will improve your credit history with each payment. Come up with a plan for tackling your debt. As you open up your credit availability, it will raise your credit score, getting you closer and closer to your goal of 580 or higher.

Explore federally-backed loans.

If you’re wanting to purchase a home before you obtain a stellar credit score, there are some options worth looking into, though you should be prepared to pay a higher interest and potentially other costs throughout the life of these loans. Start by applying for an FHA loan. Insured by the Federal Housing Administration, FHA loans offer low down payments.

If you live in a suburban or rural area, you can apply for a USDA loan, which is insured by the Department of Agriculture.

Another option is a VA loan, which is backed by the Department of Veterans Affairs and is a great option for veterans. That’s because you can get a VA loan without making a down payment. You can also reduce interest rates, APR, and the monthly principal and interest payment by applying points toward your mortgage.

Try small banks.

Another option worth looking into is whether or not there are any smaller banks or credit unions in your area that would be willing to work with you on a loan. In some cases, small institutions are friendlier to the idea of approving a home loan to a borrower who has been a loyal customer over several years. Before you give up, pay your bank a visit.

Save for a down payment.

Finally, you should plan on paying a down payment for your home, especially if you have a poor financial record. The sooner you start saving, the more money you will have to put down on a home. This will allow you to either meet a minimum down payment requirement faster or put more money down on a home in exchange for a lower interest rate.

Just because you have bad credit doesn’t mean it’s impossible for you to purchase a home. Remember to hire a great real estate agent and start building your credit as soon as possible. Consider federally-backed home loans, and see if there are any smaller banks and institutions in your area who will approve you for a home loan. And whatever the case, figure out how to begin setting money aside for a down payment, as it will help you to land a more favorable mortgage.

If you’re looking to buy your first home, be sure to work with an expert real estate broker like Debbie Warford. Call today! 214-636-7138

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