Bad credit history can make you worried about buying a house. Normally, people may have a bad credit history, and most lenders or banks may not approve a mortgage loan. According to FICO, credit history can be fair when it is about 580 and 660. It will be poor when you have a range of 500 and 570.
But there are different views on bad credit history. Some lenders put importance on good credit history and some may justify who you are with your current capability. No matter how your credit history is and you just need to prove that your current position is financially strong to meet the requirement of the lenders.
There are five categories of credit score that indicates in which condition you are standing now. You should check this status when you have been using a credit card because the credit union is reporting this status according to your credit behavior.
- 500 down- It is a bad condition of the credit scores which explains as bad credit.
- 501-600- It is a poor condition of the credit scores which explains poor credit condition.
- 601-660-it is fair credit scores and the borrowers can repay the amount owed to the lenders on time.
- 661-780-It is a good score of the borrowers who pay the amount on time and they are very careful about credit score status.
- 781-850-It is excellent credit scores of the borrowers who are an excellent user of credit cards.
How to Chase Lender With Your Bad Credit
There are many factors to examine credit status. Lenders may not go through total credit plans. But you as concerned need to do well in other areas to make sure that lenders are not going to deal with your credit score.
Additionally, it becomes so difficult to go mortgage loans when you were bankrupt. Lenders don’t approve a mortgage loan when you are in the process of paying the debt for the bankruptcy case. You may need to wait at least two years after being discharged from bankruptcy under chapter 7. Under chapter 13, you have to wait to get mortgage loans for the first twelve months after being discharged from bankruptcy. However here are some areas where you can work to get mortgage loans easily.
Higher Down Payment
Higher down payment can be a good way to convince the lenders that you are financially capable to repay the mortgage amount. This may be getting fulfillment from the lenders or banks. You are now planning to buy a house and you need to take care of personal savings to pay the higher down payment.
More importantly, you may cross the limit amount fixed by the lenders like a down payment. The lenders may be convinced to give you a mortgage loan even if you have a very bad credit history. So those who have bad credit history right now should have a good financial plan like keeping the extra amount in the pocket.
Save on Hand
As you have a very bad credit history, a simple effort can save you from any kind of inconvenience to finance for your house. It is normally found that middle and lower class family have no good plan over spending. If you want to go for a big investment like this, you start to keep some on your hand. This can benefit you at the moment when you want to get a mortgage loan for buying a house.
It is also really important to have a good plan on monthly, semiyearly to keep some as saving on hand that can save you from any denial of approving a loan from the lenders. The lenders will just testify your current capability to pay the mortgage loan.
Having a Job With Growing Company
Staying with a growing company can benefit prospective home buyers who have bad credit. Working in a growing company can be worth fulfilling the requirement of the lenders. It is also seen that the brokers from lenders or Bank Company will request you to get mortgage loans if you are a good employee of a growing company.
Employees from a growing company are much more valuable clients according to the bank policy. Do you have bad credit at present? it is not a matter to be worried that you will surely get mortgage loans from them. Your mortgage loan can be so easy to get indeed.
Surely you have a stable and high-income source in any company. The lenders feel risky to go with the people who are not permanent in any job placement. It means you have 6 months, 9 months job in different company consecutively. However, this can be a good deal to get a mortgage loan so easily when you are stable and permanent in the job.
If you are permanent, you are more likely a good employee who has a good income source also. So you may represent this true fact to convince the lenders or the banks that you have a permanent job which will enable you to carry forward of the repayment of the mortgage loan so easily.
Debt to Income Ratio (DTI)
Debt to income ratio is one of the considerable factors to the lenders especially under FHA programs. It is a calculation of your monthly income and debt spending. There are two types of debt to income ratio which are Front End DTI ratio and Back End DTI ratio. Front end DTI ratio means income to debt spending before adding a mortgage loan and Back end DTI ratio means after the spending of the mortgage.
However, you have taken a loan from different banks for different purposes like student’s loan, car loans, credit card debt, home equity loans you have also low debt ratio. There is a debt ratio which explains how much you paid from your income. If you earn $5000 and pay for the debt $1000, the ratio will be 20%. Most of the lenders prefer lower ratio indeed. So it is better to have a low debt ratio which can convince the lenders that you can get mortgage loans even if you have a bad history of credit.
More importantly, you may collect some paper payment history of debts on how you were paying debts. If It is clear and on time, the lenders will what to go with by giving mortgage loans. No matter what about your credit history is.
First Time Home Buyers Program With Bad Credit
It is really easy to get loans from so many lenders or banks even if you have bad credit. Surely the lenders have some offers for the first time home buyers program with bad credit and you have to research a little to find who those lenders are.
Look For The First Time Home Mortgage Lenders
First time home buyers with bad credit can get loans easily because there are also mortgage lenders who run mortgage programs for the first time home buyer programs with bad credit. When you have already started to make a decision to buy a house, you need to look at your pocket. If you run short of money to buy a house, you need to get some ways to make it easier. There are many simple ways to buy a house because lenders will more likely go with first time home buyers.
There are a lot of lenders that offer loans and make sure you will buy a house even if you have bad credit. So this can be a good deal for you. You can also look online and you can search for help from your dear ones.
Go Lenders Who Don’t Mind a Bad Credit History
You have got some ideas on lenders who offer loans for the first time home buyers and it is their business. But there is another issue which is your bad credit. Surely your credit score is not in the best position for different reasons. Your requirements are you need to look for lenders who are offering loans even if there is a bad credit indeed. It is true that some lenders put importance on a good credit score that you don’t have right now. But you can also find so many lenders that can provide you with mortgage loans at cheaper rates.
The Federal Housing Administration (FHA) also offers different plans for the first time home buyers as well. No matter how much you have a bad credit score. You just have to take a look at how the government is doing this to enable the first time home buyers with bad credit. It is also very easy to get a loan from governments and part of this plan, and going with FHA can be a good deal. There is no need to have a good credit score, and it may be only 580 and up. The down payment can be another good choice for the first time home buyers, which is only 3.8% which is a good deal indeed.
Look For Mortgage Rate
Traditionally the interest rate is going down like so many banks and lenders are coming to the market and offering the best deal. The first time home buyers with bad credit can search the lenders who are offering mortgage loan at a lower rate compared to other lenders.
So you don’t forget the rate. Surely they are offering you a loan in spite of having bad credit. The rate can be sky-high. When you are in the middle of getting a house mortgage loan, you have to make sure that the rates are lower. You can get this opportunity for financing for your house buy. And after approve your loan you may discuss with a real estate attorney to prepare the all legal documents .
Building Credit History Right Way
It is not so difficult to improve credit scores even you have a long time to buy a house. It can be good to know this fact when you are going to buy a house after 6 months or 1 year. Even if you have a bad credit history, you can improve by following steps.
Apply For a Secured Credit Card
Prospective home buyers can make a good plan when they have a bad credit history. A secured credit card can make sure a good credit score. It is a way to make spending and they will make payment before the due date. A secured credit may also permit you to deposit the same amount in line with a credit limit. It is a way to eliminate any risk to pay due time, which will make sure you are always fair and so energetic in your credit issue.
Use a Credit Card Personally
Most of the family members may have a credit card, but it is a big issue to use a credit card personally. An individual knows better his income and how to repay the credit card debt. When someone else is going to use it, you may see unnecessary spending which can cause a financial burden. No matter how financially you are strong but there should be a good balance between spending and repayment. It is important to be careful in using the credit card.
Don’t Reach The Limit
You have a credit limit which should not be touched by your credit. Often you may hit the credit limit and this can be a bad deal. For example, you can have a limit of $600. You should not reach this limit. You may spend the $500 that can be a good thing to do the best for increasing the credit scores. Additionally, you should be able to pay for the amount of credit on time. Whatever you do for your credit will be reported by the credit union.
Don’t Open One More Account at a Time
You may want to open different types of credit accounts from different companies and banks. You do not forget that having so many credits cards means that you can spend more that will cause a bad credit indeed. More importantly, you should pay the amount of credit on time. So you can go different credit cards if you’re able to pay off credit card debt on time. More importantly, it is good to have a credit card that should be open. This can benefit your credit score in the long run.
Check Credit Card Report
You are spending an amount of money from your credit card, and a report is getting generated about every transaction spending and repayment. This report explains what condition about credit score. The function of generating reports is to spend and pay in a timely manner. It is important to know that you have a good credit rating.
If you are not on the right track, you can limit your spending to unnecessary purposes. A good credit score can be a good deal to get so many benefits in eliminating bad credit. The credit union also may provide you with some good advice on how you can improve your good credit score. Finally, you are not going to face any problems regarding bad credit.
If you want to buy a house with bad credit, there are so many lenders who may offer with their terms and conditions. Those lenders don’t put importance on credit score but they simply want to know from you that you are capable to pay the amount that you are going to get.
But another fact is you want to buy a house after one year or two years from now. This time you should take some steps to improve credit score to make sure you can get loans easily.