Can You Buy Your First Home With Bad Credit?

You can Buy Your First Home With Bad Credit ... photo by CC user tkoch on pixabay


It is possible to buy your first house with bad credit. If you have a poor credit record because of credit card payment defaults, discharged bankruptcies, or repossessions, you can still secure a loan for your first home. Although you may have to pay a relatively higher interest rate because of the increased risk that your lender is taking, obtaining a home loan with bad credit still has a number of benefits. You will be able to buy your dream home and move to a more secure and stable location. This will make it easier to get stable employment and pay back your loan on time. As you make your payments regularly, you will fix up your bad credit rating and you will eventually have a better chance of securing a better loan in the future. Here are some valuable tips for getting a home loan with bad credit.

Start Cleaning Up Your Credit Record

To enhance your chances of obtaining a fairly good interest rate on your bad credit home loan, you should do your best to improve your credit rating. Start paying back your old debt and enhance your credit score. Cut down your monthly expenses and make sure you do all you can to pay up your credit card debts. As you do this, you will be showing your potential lenders that you have the capacity to pay back the loan they offer you. In fact, some brokers will be ready to overlook some credit issues if you can give good explanations for them.

Seek for a Loan From a Specialist Lender or Broker

Some brokers specialise in helping people with bad credit. They can help you obtain loans through their network of lenders and financial institutions. With the professional experience of these finance experts, you can enjoy quick approval of your application and a thorough explanation of all details involved in securing the loan such as interest rates and repayment details. 

Save As Much As Possible

Even if you have a bad credit history, your ability to save a large deposit for the initial down payment will make it easier to get a home loan. This will show your lender that you have a good source of income and the capacity to meet up with your monthly payments when they are due. Also, the larger your down payment, the lower your interest rate will be. Sometimes, you may be able to obtain a soft loan from friends or family or convert some of your assets to cash. Make sure you do this at least 6 months or more to the time when you will approach your lender for your home loan.

Seek for Private Financing

Private financing is a good option for obtaining a home loan when you have bad credit. It can take different forms. First, you can get a friend or close relative who has a good credit rating to co-sign for you. Such a person will vouch for you and share in the responsibility of paying back the loan if you fail to do so. Also, you can seek for a loan directly from a private lender or family member. Although this loan will not result in bankruptcy if you default, it should nevertheless be properly documented.

To buy your first home with bad credit is not an impossible task. However, as you apply the tips provided above, you should also strive to compare rates and work with finance experts that will help you to simplify the process and explain any details you do not understand.