It’s obvious that getting a traditional home mortgage from a bank is going to be more difficult than ever right now, but that doesn’t mean you don’t have other options. There are still ways to find a home loan when your credit has potholes that make you look risky in the eyes of a lender. You just need to look for different options of companies that give you a chance.
One option may be to find a landlord willing to finance your home on their own, or to give you a rent-to-own agreement. Because we are in the midst of a foreclosure crisis, there are many homeowners looking for a way to avoid foreclosure on their home. If you can give them enough money up front to catch up on your mortgage payments right away, they may allow you to rent-own or take over your payments until you’ve paid off the house. This is more likely to work if you know the owner from the start, but it is possible to find people you don’t know who are open to an arrangement like this.
There is another option for someone who can get a home loan through conventional means, but due to poor credit, simply cannot get one large enough to cover a decent home. Many homeowners trying to save their home from foreclosure will agree to a short sale, which is where the home is sold to you before foreclosure proceedings are complete, for what is owed on the home. This value will usually be much less than the actual value of the home, but the homeowner saves your credit from the hard hit of foreclosure and you get more home for your money.
There may be ways to reduce the risk a lender sees when considering you for a home loan. The first step is to deal with credit cards to create unused credit on your report. You do this by not using your card anymore, just stop immediately. Start paying off the lowest balances, but don’t close the card. You want to pay off as much of your checking balance as possible and leave accounts open so your credit report shows the unused credit that is available to you. This looks good from the lender’s perspective.
If there are medical or utility bills holding you back, pay them as much as possible. Paying off debt and living on your actual income can be challenging and may take a bit of time, but it can lead to the home loan you want in the long run, so it may be worth it. Anything you can do to reduce the risk stamped on your credit history should start right away.
Financing bad credit loans may be more difficult today than it was just a year ago, but it’s not impossible to work hard and look at the options that are still available.