Financial difficulties can affect anyone at any time, even with careful planning. When trying to recover, you can end up with a bad credit score, making it difficult for you to make a big purchase, like a new home. However, there are steps you can take to put yourself in a better position to make this purchase despite your current financial situation. Read on to find the best tips for buying a home with bad credit.
Check your credit score
Before looking at your available options, you should first assess your credit status. Many sites will provide you with your FICO credit score for free, so avoid sites that claim to do so for a fee. Depending on your score, you may need to make significant adjustments to improve it, or you may only need one or two adjustments to give it a proper boost.
Check for errors
When you receive your score, you must review it carefully. Look for filing errors, such as a closed account declared open or the same debt repeatedly reported, which could artificially reduce the score. If you discover any errors, you can file a dispute with the credit bureaus, which can take anywhere from a few days to a month.
Determine your loan options
Your particular situation will dictate the loans you can get. Conventional loans generally require a credit score of at least 620 to be eligible; However, if you have a high income or a large enough down payment, you may not need such a high score. On the other hand, government guaranteed loans, such as a Federal Housing Administration (FHA) loan, will accept a lower credit rating and down payment than conventional loans.
What to do after a short sale or foreclosures
Suppose you previously owned a property but ran into financial difficulty and had to do a short sale or foreclosure. In this case, you might be faced with a unique set of conditions while looking to buy a new home. After a short sale, you will have to go through several procedures to buy a new home, including waiting a certain number of years before you can qualify for a new home loan. When you have to go into foreclosure, the minimum waiting time will be significantly longer.
One of the best tips for buying a home with bad credit is not to let your current financial situation put you off trying to buy a home. Everyone should have the opportunity to own a home, and there are always options available to you.
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