Yes – You Can Buy a House even with Bad Credit !!

Bad credit? Can you purchase a house? Briefly the answer is a nod – yes you can but there is more to it. Previously it was easy to contract a sub-prime loan without hassle but the foreclosure crisis has made lenders doubly cautious. However, despite this even with a bad credit there are ways and means of entering your own home but before that ask yourself this candid question. Is purchasing a house good for you right now?

There are two mistakes to be avoided. Firstly local banks will not be the best place to knock as they have strict lending rules that they will not bend for those with low credit scores. Secondly it is best to avoid Internet advertisements. Frequent checking on your score could lower your score further. Get a copy of your credit history, check for mistakes and be absolutely sure of your position before sending out feelers.

There is a site that offers credit report for free once a year from three of the credit bureaus as per latest federal law. FICO scores less than 680 are not looked upon favourably. Lenders evaluate it while deciding on granting a loan. When the score is below the norm then an option is to put in your application for FHA (Federal Housing Administration) loan insurance. This helps applicants to be eligible for loans from the lenders because the risk is taken over by FHA if the borrower defaults. The lender will not ask for a hefty down payment even if the credit history is weak. Some proof has to be given that currently the borrower will be able to manage the mortgage but otherwise past history of foreclosure or bankruptcy is not taken into count.

For those with bad credit to be eligible you will have to make a big down payment or be ready to pay a high rate of interest. Secondly you must wait for time to run out on the limits placed on you due to your facing either foreclosure or bankruptcy. A stain from bankruptcy lingers for 10 years but one can apply for a loan after 4 years from bankruptcy date. After 2 years from foreclosure one can get a FHA insured loan for a down payment of only 3%.

Another alternative is to build a relationship with the seller, gain his or her trust and then get a member of the family to co-sign the loan.

There is no dearth of tough money lenders who will give loans even 6 months after foreclosure but their conditions are also tough.

Bankruptcy is not as fearsome as many apprehend – rather it gives one a fresh start. The lender now knows that the borrower does not have any debts and that you cannot file for another bankruptcy before 7 years.