How to Buy Property with Bad Credit
When a person has bad credit, they may find it difficult to obtain a traditional type of mortgage from a lender. This doesn’t mean that they cannot buy property though; it just means that other options will have to be investigated. Flexibility is the key to getting a mortgage if you have a bad credit history, the following are some general tips that will help you out if you are interested in buying property but don’t have good credit.
Alternative Options for Those with Bad Credit
One of the best ways that a person with bad credit can obtain a mortgage or loan is by putting up a larger amount of money for the down payment. Some creditors are much more willing to work with a potential borrower if they are open to making a larger down payment than usual. For instance, if you want to buy a home and can put 15 to 20 (or ideally more) down on the purchasing price, the lender views that as less of a risk and may be more inclined to approve your loan. Although it can take a considerable amount of time to save up for a big down payment, it can help get you approved if you have a less than stellar credit history or rating.
Another alternative to going the traditional mortgage route is by looking into getting a mortgage with a lender who specializes in subprime mortgages. These kinds of creditors routinely work with borrowers who have low income levels or bad credit histories. If you have applied for a loan with a traditional creditor and were denied, you should look into a lender who does subprime mortgages in your area. Sometimes the lender who denied your initial loan may even refer you to some subprime creditors.
An option that is sometimes overlooked by borrowers is getting someone else to cosign their loan with them. For example, it is not uncommon for those with bad credit to ask their parents or relatives to cosign on their loan. Under these circumstances, the lending institution will review the financial and credit history of both signers. If the person you are co-signing with has a high level of income or a better credit history, the lender may view the loan as less of a risk and approve it, making it much easier for people with bad credit to obtain a mortgage. Some sellers will also be open to financing a buyer if they are having a tough time selling their property. The way this works is that the buyer would make mortgage payments to the seller after making a down payment.
Conclusions
Remember that although good credit may considerably help a borrower out when searching for a mortgage or loan, it is not entirely necessary. Whatever option you end up going with, always know what your credit score is and the ramifications of the loan or mortgage you are taking out. Having an experienced financial advisor help you out only benefits you, and takes away much of the headache that comes along with buying property.