How do I buy a house with bad credit?

Asked by Akia Thomas, 38141 Wed Jan 6, 2010

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7
Debra (Debbi…, Agent, Livingston, NJ
Mon Feb 1, 2010
I don't mean to sound glib, but before you look to by a house, I'd concentrate on imrpoving your credit first, and saving up money for a down payment.................. if you already have a down patment, then save it up to have a cushion in the bank.

My suggested order of doing things...........
1. improve your credit score
2. save money
3 buy a house

Good luck!
0 votes
Dan Chase, Home Buyer, Texas City, TX
Mon Feb 1, 2010
Maybe it is because it is late and I need to get some sleep.

My reply is you shouldn't.
Improve your credit. Improve your financial situation, build up a solid money chest and then buy.

If you have bad credit now and buy you risk having some problems come up and that would lose you the house and hurt your credit even more.

You are not ready to buy. When you are, this kind of question will not be on your mind. You will be asking what kinds of problems are likely after I buy a house and how can I handle them.
Financing, that is the least of your problems. Houses eat money worse than cars do.
0 votes
Shawday Bent…, , Memphis, TN
Sun Jan 31, 2010
I agree with Marilyn. Getting some guidance from both a mortgage broker and financial planner is a quick and inexpensive way to find out if you're currently prepared to consider owning. If you've been on a good recovery from some credit dings in the past but now have steady income from a solid employer, have been current on your bills for over the last year or two, and have some emerg. fund and down payment savings etc., then it could be that it really is your past credit history holding you back, not your present financial health.

Only if what I've said above sounds like your situation and you've received the financial analysis and counseling then I have an answer posted here on trulia in response to someone with a similar question as yours: http://bit.ly/c2Kasp

As always, I caution you and any other reader to please be responsible when it comes to home buying and how much you can safely, realistically afford.

Best wishes to you!
0 votes
., , Memphis, TN
Sat Jan 9, 2010
With the current lending standards, your credit score is very important. You should consult with a Loan Officer at a Direct Endorsement Lender. They can check your credit and let you know what you need to do to improve your score.
0 votes
Mack McCoy, Agent, Seattle, WA
Wed Jan 6, 2010
How bad? 500s? Bad. What's your credit history - a bunch of slow-pays, some collections, recent bankruptcy, high debt-to-income?

Your credit is usually trying to tell you something. If you've got bad credit, it's usually because you're not paying your bills on time. Taking on a humongous bill that wants to be paid on time for thirty years is as good an idea for someone with bad credit as running a half-marathon is for a couch potato.

Ideally, you get your credit (or your body, for the couch potato / runner) into shape by getting into a training routine. For you, that routine is getting your bills paid on time and paying down that debt. Then, and only then, should you be buying a house.
0 votes
Marilyn Bell, Agent, Calabasas, CA
Wed Jan 6, 2010
Home ownership comes with a lot of responsibility, along with unexpected maintenance costs - even in a brand new home. There are people who bought brand new homes only to have their builder go out of business and file bankruptcy. I personally know someone with a $70,000 problem - foundation has basically cracked all the way through the middle and its causing the whole house to separate. They now have cracks in their ceiling and a window that you can just push out with your hands - and that builder filed bankruptcy. They are now battling the home warranty company (who doesn't want to cover it since they say it was built incorrectly) and their homeowners insurance company (and I think they are claiming the same thing).

We Realtors love to see people buy homes, but at this stage in your life it may be best to sit down with both a mortgage professional and a financial planner to get yourself back on track by improving your credit and establishing and executing a plan to improve your credit and keep it on track. You may also consider entering a lease purchase agreement if you really want to start making your home now while giving you a window to clear up your credit and have the sellers on the hook for your maintenance during the initial lease period which is typically 12-36 months. Good luck!
0 votes
Robin Swenson, , Tacoma, WA
Wed Jan 6, 2010
How bad is bad? It is always important to understand how your credit turned south. If you think your credit is bad, you must have received your credit score report from a lender or even perhaps a website such as http://www.freecreditreport.com. Be diligent about paying bills promptly and also saving a little cash every month to have the funds necessary to close when you are able to eventually buy a home. You may qualify for a downpayment assistance program in your area, but there is usually a minimum amount to be paid by the buyer and you will need some cash reserves. The opportunities to buy a home with 'bad' credit are slim. However, you might consider finding a house or condo that you like and propose a lease / purchase option with the seller. While you lease the home for a year or two, and meanwhile repair your credit, when the lease expires, you can exercise your option to buy the property.This is difficult to do however, since the seller will be anxious about your poor credit history, but with a good deposit and explanation of your circumstances, you just might succeed in securing a home to buy with bad credit. Good luck to you!
0 votes
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