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How to Buy a Home with Very Bad Credit

theking | Jul 3, 2009 | Views: 453 |

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How to buy a house with very bad credit is something that many people ask these days, especially with the economic recession in full force. More people have bad credit than good credit. This means that the majority of people are locked out of every getting loans from banks and other conventional lenders.

But, fear not, there is a way how to buy a house with very bad credit history. If you have poor credit and want a house, you can basically have two choices here. You can go through a bank and get a conventional mortage with a down payment, or you can seek out a subprime mortgage from a bad credit lender.

The best option is to put a down payment on a home. By putting a down payment on a home, you can get a conventional mortage interest rate through a bank or credit union. You will need to put down roughly about 2-5% of the fully purchase value of the home. But, you can command the lowers mortage interest rates through a down payment AND still be able to qualify with poor credit history. There are also some other factors that a bank will look at such as your debt to earnings ratio. This means that if your debt payments are more than 30% of your earnings, then the bank will be unlikely to give out a loan. This is because banks want to see that you have enough income to live and to pay your debts comfortably.

Now, if you don’t have a down payment on a home, your only option is to try at a sub prime mortage from a poor credit union. For the significant majority of the people, this will be how to buy a house with very bad credit. Bad credit mortage lenders give people the chance to get a home even if they don’t have good credit. The cost is that said homeowners will pay higher mortage interest rates.

If you want one of these bad credit mortgages, you need to thing very carefully whether you can afford the mortage or not. America’s housing crash occurred because people who could not possibly afford a sub prime mortage were being given such mortgages.

If you can afford the higher interest payments then you should start looking for as sub prime mortage lender online. There are literally thousands of lenders out there looking to give you a bad credit home loan. This means you can get a lower interest rate by doing some comparison shopping. Take a look at least a dozen poor credit mortage lender websites to compare what’s offered, then choose the best lender to apply online for a mortage to.

So in conculusion, if you are wondering "can I buy a house with bad credit" the answer is yes, but you will pay more. But for some people, the cost is worth it.

How to buy a home with very bad credit will ultimately depend on your willingness to do research and your ability to make higher interest payments. The more research you do, the better a position you will be in to get a better mortage interest rate.

Make sure to check out these related Info Barrel articles about poor credit and home buying: