Don’t Let a Poor Financial Record Ruin Your Dreams of Buying a Home

By Kurt Real Estate Mar 19, 2021

If you are ready to plant roots and settle down but purchasing a home gives you anxiety due to bad credit or a low income, you do not have to give up the dream. Home buying is still an option for Americans with a poor financial record. These tips from Liz Peters can help you work through this difficult situation.

Your Credit Report Tells the Story

As you prepare to buy a home, you need to prepare your credit for a mortgage. Get an official report from all three credit bureaus, including TransUnion, Experian and Equifax. Each bureau has different reporting methods, so your credit scores will vary. A good credit score for buying a home is anything over 740.

Review your reports to ensure they are accurate. Since not all lenders report to every bureau, there may be minor differences. Pay attention to your credit limit and account balances. If you maintain high balances, it negatively affects your rating. Consider paying down your credit cards to help with your score.

Make sure all your accounts are current. Outstanding accounts or collection accounts negatively affect the score. If you find any inaccuracies, start a dispute process as quickly as possible.

Housing Market Research Gives You an Edge

Researching the housing market means more than looking up local properties for sale. During a market analysis, you can find out whether it is a buyer’s market or a seller’s market. A buyer’s market has more supply than demand.

When studying the housing market, determine the economic health of the area where you live. How are the employment prospects? What are the educational opportunities? You are more likely to get a return from homes in areas with good economic, educational, ecological and employment health.

Mortgage Options Give You Alternatives

If this is your first time buying a home, there are several home buyer programs available to you. Some common loans include FHA loans, USDA loans and VA loans.

An FHA loan helps buyers who may have low credit scores and small down payments. Funding comes from the Federal Housing Administration. For an FHA loan, you will need mortgage insurance.

USDA loans are offered to borrowers in USDA-eligible rural areas. Borrowers may receive up to 100% financing. VA loans are backed by the U.S. Department of Veterans Affairs for qualified military members and veterans.

Interest Rates Can Become Game Changers

Mortgages can have adjustable rates or fixed rates. An adjustable-rate mortgage generally begins with an introductory period that may last for three, five, seven or 10 years. During this time, your interest rates are steady. After this term, your rate may change periodically.

According to the Consumer Financial Protection Bureau, you may be able to take advantage of discount points and lender credits. Paying points means you pay an upfront fee, and your discount points can lower your interest rate. To find out if points offer a good solution for you, you should take into consideration your loan details, personal finances and long-range plans for keeping the house. Use a mortgage points calculator to help determine if this is the best option.

Do not give up the dream of buying your first home. Your financial record does not have to determine your future. You can still buy a home despite having a poor credit score.

Looking for more help with the home buying process? Liz Peters provides top-quality real estate services and will educate you through each step of the process. Call at 949-683-5374.