Everyone deserves a second chance. Even if you have bad credit, it’s possible for you to purchase a new home – and get your life back on track! In this article, My Home Town Builders will look at a few tips on how you can buy a home with bad credit!
- Look Into FHA Loans
FHA loans are designed specifically for people who have poor credit, or are otherwise struggling in their finances. These loans are backed by the Federal Housing Administration (FHA), and are typically quite a bit more lenient than loans from other lenders.
According to the Department of Housing and Urban Development (HUD), you can get an FHA loan approved with a credit score of 580, as long as you can provide a 3.5% down payment. In contrast, most private mortgages would require you to have a least a 620-640+ credit score.
- Save Up For A Large Down Payment
A large down payment can make your mortgage seem much less risky to lenders. If you have bad credit, but have still managed to save quite a bit of money for a large down payment, you may be able to get a loan.
If you can put down 20-30% or more on your home, you decrease your “loan-to-value” ratio, which means you may also get better interest terms on your loan, even if you have bad credit.
- Demonstrate Financial Stability To Lenders
If you have bad credit, but can demonstrate that you’re financially stable, you may qualify for a home loan.
For example, if you can prove you’ve consistently made rent payments on time for more than a year, or indicate that you have enough “cash reserves” to pay for 6-12 months of mortgage payments, you may be able to get a loan, even with a bad credit score.
Need More Home Buying Advice? Contact My Home Town Builders!
At My Home Builders, we’re experts at buying homes in Central Florida. Whether you have bad or good credit, we’d love to hear from you, and help you buy your dream home! Contact us today.