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Yes, It's Possible: Buying a Home With Bad Credit

By Colleen Colkitt

Bad credit occurs for many reasons. Student loans can pile up, or unemployment might be the culprit for it. Even those coming out of the military might find themselves with uncertain finances. If you're in the market for buying a home but think your credit will stand in the way, consider these loans to help you through it.

FHA Loan

An FHA, or Federal Housing Administration, loan is an option for someone who has bad credit. The reason why this might be to an individual's advantage, is because FHA guidelines are two years after a foreclosure, so the borrower could potentially qualify for as little as 3.5% down. Sometimes FHA loans are government sponsored, and they are very popular among first time home-buyers, because of their accessibility to those with poor credit. This loan includes an upfront mortgage insurance premium, or UFMIP, and an annual premium as well, which is the mutual mortgage insurance, or MMI. The FHA borrower pays a monthly mortgage insurance until the loan is paid to about 78% value, and the MMI is paid in addition to that monthly payment.

To qualify, a borrower must do several things before obtaining an FHA loan. Based on your FICO score, you will have to pay a sufficient down payment that will be about 3.5% of the sale price, depending on your score. Some tricks to reduce your score include lowering the balance on owed credit cards to 30% or less, as well as getting your creditor to increase the credit limit. These techniques help to lower your score.

Conforming Loans

To get a better rate for a conforming loan, the waiting period is four years after you've filed bankruptcy.

To increase your chances of qualifying for a conforming loan, get a major credit card and avoid late payments. After filing bankruptcy, you cannot file again for seven years, and it gives the illusion of having a fresh start. You have no debt and if you show steady employment and regular salary, your chances for the loan increase.

Land Contract

Land contracts are a form of security agreement between a seller and buyer, or between a vendor and vendee. The vendor or seller will get a legal title when they agree to sell a property financed by a buyer or vendee. The vendee receives equitable title. After the payment is complete, the vendor gives the vendee a deed to the property. This helps those with bad credit make smaller installments or payments on a loan. There is little issue with interest or problem with bad credit.

Alternatives

Credit unions can be an option as well. Credit unions are more willing to work with people with bad credit because they tend to work on a more personal level. However these loans may not always be to your benefit when looking to buy a home.

Going with a private loan may be better for you and your financial situation. A peer-to-peer lending agreement is a loan from a private lender, which might be a better alternative to borrowing from a bank because banks have a reputation of having built in costs and high interest rates.

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4/23/2015

Annie Grand

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11/10/2014

Eric Jones

AFFORDABLE LOAN NOW AVAILABLE @ ICC Mortgage And financial Services, Is a sincere and certified private Loan company approved by the Government, we give out international and local loans to all

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11/10/2014

Eric Jones

AFFORDABLE LOAN NOW AVAILABLE @ ICC Mortgage And financial Services, Is a sincere and certified private Loan company approved by the Government, we give out international and local loans to all

... More
Reply