Buying a Home with Bad Credit: Your 4-Point
Path to Success
by Brandon Cornett
There was a time when buying a home with bad credit was next
to impossible. Fortunately (for people with bad credit), times
have changed.
This change is the result of many factors: increased competition
in the mortgage industry, a wider variety of loan programs,
Internet-based lending, etc. Some lenders today even specialize
in offering home loans to people with bad credit.
Like I said, times have changed.
But while it has gotten easier to buy a home with bad credit,
you still need a solid plan of action. Here, then, are your
four steps to home buying success:
Buying a Home with Bad Credit - Four Steps to Success
1. Get a copy of your credit report.
For starters, you should obtain a copy of your credit report
from all three of the credit agencies: TransUnion, Experian
and Equifax. Review them closely for errors. The last thing
you need are errors that drag your credit score lower than
it should be.
If you find an error on your report, you can dispute it online
through the credit agency's website:
www.equifax.com * www.transunion.com * www.experian.com
2. Shop for a lender.
Do plenty of research to find a good lender. Be wary of predatory
lenders who take advantage of people with bad credit (because
they don't have as many loan options). Get quotes from multiple
lenders. Ask around. Go with trusted names. Do some online
research to identify "red flag" lenders.
Here's some good news -- through a combination of government
regulation and increased competition in the mortgage industry,
the number of reputable lenders who offer bad credit mortgage
programs continues to increase.
3. Focus on improving your credit.
Improving your credit score will help you in the short term
(to obtain a loan) and the long term (to avoid bad credit
situations for good!). You can improve your score by paying
bills on time, especially your mortgage. Don't open any new
lines of credit, and try to pay down your existing lines of
credit. Once you raise your credit score, 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 holding down a mortgage and making payments
on time, you can eventually elevate your credit score to the
point that you quality for a lower interest rate.
When that happens, you can refinance the mortgage at the
lower rate, which will in turn lower your monthly payment
and get you back on track. Better credit, lower mortgage.
You can do it!
* Copyright 2006, Brandon Cornett
About the Author
You can learn more about buying a home with bad credit by
visiting HomeBuyingInstitute.com, the Internet's largest library
of home buying tips and articles. Visit: http://www.HomeBuyingInstitute.com |
