Buying a home can be both
exciting and stressful but, for those with past credit problems, the process
may also seem intimidating.Â The good
news is that many lenders have adapted to the idea that many hopeful homeowners
simply need a second chance, which means that past credit problems no longer
have to define your future.
When life unexpectedly
takes a turn for the worst, it's not always possible to come out without a few
bumps and bruises.Â Every day, people are
faced with late or missed credit card payments, mortgage foreclosures,
bankruptcy proceedings, auto repossessions and even civil judgments that will
affect their credit reports for years to come.Â
Whether it's from a job loss, injury or just a simple case of temporary
hardship, credit blemishes are often a part of life.Â The good news is that they no longer have to
prevent you from becoming a homeowner.
Give Yourself A Little
After experiencing a
credit problem, most lenders will want to see an attempt to rebuild your credit
through a steady payment history with a new account.Â This can be accomplished by applying for a
credit card and maintaining a responsible use of the account.Â If you aren't approved for an unsecured card,
you can always apply for a secured credit card.Â
Either will rebuild your credit over time and will help to show lenders
that youâ€™re past credit problems are just that - in the past.
Clean Up Your Credit
Before applying for a home
loan, make sure that you check your credit report from each of the three major
credit reporting agencies.Â Every 12
months, consumers can request a free copy of their credit report from Experian,
Equifax and Transunion.Â If anything is
incorrect or found to be inaccurate, filing a dispute with the credit reporting
agency can help to get the information corrected before speaking with a lender.
When you apply for a home
loan, the lender will access your credit report for the purpose of determining
your creditworthiness.Â In an effort to
ensure that you have the best possible chance at being approved for the loan at
the best possible interest rates, making sure that your credit report is
accurate is a must.
Save Up For A Down Payment
Some homebuyers often
qualify for a mortgage with down payments as low as five percent (three percent
for FHA loans), but those with past credit problems may be required to shell
out up to 35 percent or more for a down payment on their new home.Â A buyer who pays a larger down payment
obviously has more vested interests in the home and may, thereby, be less
likely to default on a loan.Â If you have
past credit problems, check with your lender about specific down payment
requirements and start saving!
Creative Financing Options
If you've exhausted all of your conventional efforts and are still
turning up empty, don't give up just yet.Â
Alternative financing is an option that many homebuyers use to purchase
a home.Â Your REALTORÂ® can provide you
with details regarding any lease purchase and/or owner financing properties,
which may require no credit check, no bank qualifying, a low down payment and
competitive interest rate options.