How to Purchase Real Estate With Poor Credit
Purchasing a house with poor credit is quite difficult because the mortgage process is very credit driven. In powerful economic times, buying a house with poor credit is possible as many lenders offer subprime loans, but at an economic downturn many lenders stop offering subprime possibilities, and people with bad credit are the first to be turned off when applying for a mortgage.
Obtain a copy of your credit report. You are qualified to receive one free copy every year from each of the three credit reporting agencies: Experian, Equifax and Transunion. Contact them directly for your free annual report; it doesn’t affect your score. Keeping tabs on your credit report can help you catch mistakes and will provide you a good idea about what has to be enhanced. You do have to cover if you would like to see exactly what your credit score, or FICO score, is.
Talk to a loan advisor or mortgage agent. They’ll help give you pointers and action steps that can help you improve your score. Do not wait until the final minute to do this, since it will take some time for your credit rating to change. They’ll want to pull your credit report for you which will have your credit rating on the report. They may or may not bill for this up front.
Research your options. With a poor credit rating you’ll require a subprime loan, which isn’t offered by all lenders. Locate the lenders that offer subprime loan options and make sure that you read the terms and conditions carefully. Ensure that you also look into federal and local government loan programs because some may have more lenient credit restrictions.
Get pre-approved for a loan. You can do it through a bank, a mortgage broker or a credit union. They’ll take your credit rating, debt to income ratio and down payment into account and will explain to you just how much you’ll qualify for with regard to a mortgage. They’ll also tell you exactly what interest rate you qualify for. A poor credit score will only be eligible for a high interest rate.