Buying a home with bad credit used to be nearly impossible. Things have changed. Today, many lenders offer loan programs specifically designed for people with bad credit. Some lenders even specialize in it.
Like I said, the times have changed.
But even though it's easier to buy a home with bad credit these days, you still need a solid strategy. Here are your four steps to home buying success:
Buying a Home with Bad Credit -- Your 4-Point Plan
1. Obtain copies of your credit report.
Start the process by getting copies of your credit report from all three credit bureaus: TransUnion, Experian and Equifax. Review your credit reports closely for errors and inaccuracies. You don't want errors dragging your score any lower than it should be. If you find a mistake on your credit report, dispute it online through the credit agency's website.
2. Shop for a lender.
Buying a home with bad credit requires you to be extra cautious. Some lenders try to take advantage of people with bad credit (since they don't have as many loan options). These lenders are often referred to as predatory lenders, and the name fits.
Avoid such lenders by shopping around and trusting your instincts. Get more than one quote. Ask around. Go with trusted names. Conduct research online. Watch out for “red flags.”
Here’s some good news. Due to government regulation and industry competition, the number of trustworthy lenders who offer bad credit loans has increased dramatically.
3. Dedicate yourself to improving your credit.
Always think long term when trying to improve your credit. Taking positive actions today will help you for years to come. Pay your bills on time, especially your mortgage. Don't open any new lines of credit. Pay down your existing lines of credit. Raise your credit score enough, and you'll be able to refinance the mortgage at a lower interest rate. And that leads us to step #4.
4. Refinance as soon as possible.
Buying a home with bad credit can actually help you improve your credit. By obtaining a mortgage loan and making payments on time, you can increase your credit score to the point that you quality for a lower rate. This will in turn lower your overall monthly payment.
Better credit, lower mortgage. You can do it!
* Copyright 2006, Brandon Cornett. You may republish this article if you keep the byline and author's note, and also leave the hyperlink intact.
About the Author
Brandon Cornett is the editor of HomeBuyingInstitute.com, the Internet's largest library of home buying advice. To learn more about buying a home with bad credit, visit http://www.homebuyinginstitute.com
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