Your credit score is one of the most important things that will determine if you qualify and how much you qualify for a mortgage. Typically, the higher your credit score, the more you will be approved for. Keep reading to find out how to buy a home even if you have bad credit.
Did you know that the average household is in over $15,000 in debt. This mean that you can buy a home even when you have bad debt. Before you can though, we recommend taking care of your report. This is easier than you think. Keep reading to find out exactly what you need to do to get your credit scare home buying ready.
The first question you may be asking is how a credit score is calculated. Your credit score looks like 5 parts; your payment history, debt-to-credit, length of history, credit, and finally new credit. To make it simple, the longer you have been paying off debt and ensuring you are always on time will help your credit score to increase. If you are late on payments, or have not had any line of credit for long, you will not have a high score.
So what is considered a good credit score? Well, a perfect score means that you have a number of 850. This is rare. Once you have a credit score of 740, you should be able to quality for a mortgage with a great interest rate. If your score in the 700’s, you will still be able to qualify for a mortgage, however your interest rate may be a little higher. If you have a credit score under 660, you will need to jump through additional hoops in order to qualify for a loan.
If you don’t have a credit history, it’s important to get one as soon as possible. One of the easiest ways to do this quickly is to become an authorized user on your parent’s card. Mortgage companies understand that no one is perfect. If you have forgot to make a payment once or twice, you can always take steps to repair your credit score.
If you don’t have good credit and you are looking to buy, don’t worry, there still is a way. There are loan programs out there designed to assist people with medium credit scores. We will be happy to assist you with this process if you find yourself in this situation.
If you do have a mediocre credit score and have time before purchasing a home, there are quick things that you can do to raise your score. Firstly, make sure that you pay all of your bills on time each month. They may sound obvious, but you would be surprised how many people simply forget to make a payment, even if they have the money. We recommend scheduling a minimum payment on your credit card. This way you are never late. Many experts talk about the 30% rule. This means that any charge to your credit card should not exceed 30% of the limit. This will help raise your score and will help prevent you from overspending and not being able to pay it off, or make payments. If you ever notice an error on your credit report, there is something that you can do. You are entitled to a free copy of your report every 12 months. Make sure to take advantage of this to ensure everything is correct. If you do notice a mistake, ensure that you contact a creditor immediately. If they confirm that there is an error, they will let companies such as Equifax, TransUnion, and Experian know to remove the error. This can be the result of a simply name mix up.
Although having good credit I always what people aim for, when it comes to buying a home it does not need to be perfect. If you are unsure of the home buying process, or you want more tips, contact us today!