If you have a low credit score but are very interested in buying a home, you are probably going to have a difficult time. However, depending on your exact score, conditions in the market, and a few other factors, it might still be possible.
Of course, you’ll want to be sure that you can actually afford to purchase the home, and that you need to do it now. There are ways to improve your credit score, and it can usually be done more quickly than you think.
However, if you absolutely must purchase a home right away, consider the following strategies.
This could be a simple tactic to consider if you are going to be living in the home with others. This would be especially easy if you are married and purchasing the home with your spouse.
Of course, it would be most helpful if your spouse has stronger credit than you do. If that’s the case, however, you might also explore the option of having your spouse purchase the home on their own. Keep in mind, however, that it will be difficult to add yourself to the mortgage after the fact. You can still be considered an owner of the home through other means, though.
Large Down Payment
Regardless of credit, the larger your down payment, the easier it will be to get financing. If you’re able to place a high percentage of the purchase price as a down payment, this will show potential lenders that your income is high, or at least that you have resources to assist you if you’re ever in trouble.
Shy away from borrowing this money, however. In recent years, banks have been very interested in finding out where these down payments are originating from. If you take the money as a loan from your retirement plan, for instance, that might negatively impact your chances of obtaining a mortgage. Borrowing the money from friends and family can similarly harm your chances of getting a loan.
Place Emphasis on Your High Income
It would work best if you are able to come up with a large down payment by saving your own money. Even if your credit score is low, this will help you to show the bank that you are making much more money than you currently spend.
Potential lenders may be interested in asking you why you haven’t used your high income to improve your credit score, though. To the lender, it may appear that you haven’t handled your finances responsibly. Be prepared to answer questions about this.
If, for instance, you have recently gotten a new job or a new source of income, you could explain that you simply haven’t had the time to improve your credit yet.
Work with a Broker
A mortgage loan broker could help you to find the best home loan rates. Brokers are generally aware of programs and policies that the available lenders in your area have. This can save you the time and hassle of researching the many banks to find one that can offer you financing.