Many people dream of owning their own home, but often times this goal seems lofty and out of reach due to circumstances such as bad credit. While home ownership can save you a lot of money over the long run since you no longer have to pay rent, getting there can be tricky for anyone not able to make down payments or meet lender requirements of minimum credit scores and credit history.
There are ways to purchase a home even if you have bad credit, which means home ownership isn’t completely out of reach. Let’s look at some of the ways you can purchase a home even if you have less-than-stellar credit or even no credit.
One of the first things you want to do is see how lenders will see you by pulling your credit reports. You’ll want to see the big picture based on your credit score, your payment history, and whether or not you’ve ever defaulted on loans. In cases of bad credit, the chances are you have some unpaid bills. This is how lenders are going to see you, and it’s going to help them determine your creditworthiness.
Once you’ve figured out where you are credit-wise, you can start looking at some alternative mortgage solutions such as lending networks and government programs.
There is an assortment of lending networks out there that are perfect for home buyers who need alternatives to traditional mortgage loans. These lending networks can pair you up with private lenders who will not only look at your creditworthiness, but may also look at your particular situation. You may also want to look into establishing alternative credit. This is where you create a credit identity based on your utility, rent, and other bill payment history. Alternative credit may paint a different picture of your creditworthiness that can show private lenders that you are worth the risk even if your credit score is low.
Several government programs exist for first-time home buyers to help them become homeowners. Depending on where you live, you may find programs that are specific to rural areas, programs that are specific to fixer-uppers, and even programs that are specific to foreclosed homes that need new owners. While your credit will still be reviewed, sometimes these programs may provide solutions for home ownership where traditional mortgage loans aren’t available.
Existing homeowners can look into refinancing options to cash out their equity to purchase a new home. According to https://www.1stukmortgages.co.uk/saga-equity-release/, you can get a Safety, Equity Release Plan that allows you to sell a portion of your home for the equity and thus use it to qualify for a down payment on a new home. These programs are often tailored for individuals over 50.
If you need a no-down-payment loan, one solution available to you is to secure private mortgage insurance. These types of insurance exist to make sure lenders will be compensated if the home buyer defaults on the loan. In some cases, taking out this extra insurance can guarantee payments to the lender, thus giving them more leeway during the approval process, ultimately helping people with little to no down payments or even bad credit purchase homes.
Even if your credit is not great and you don’t have the money you need to put a down payment on your dream home, some programs will allow you to buy a home regardless. You just have to do your due diligence and find the right service or program for your particular situation.