If your credit is shaky, the safest bet for buying a home is to save and wait for your finances to firm up. That said, you have other options when it comes to paying for a home. Here are four of them:
Get a co-signer.
If you’re fortunate enough to have a close friend or relative with good credit and enough cash, you can opt for a co-signer loan. In this arrangement, the interest rate and approval are determined by the credit score of the co-signer, which means you could get a loan you otherwise wouldn’t have access to.
Use bankruptcy to your advantage.
Bankruptcy has negative associations for obvious reasons, but it also offers the possibility of a new start. After you file for bankruptcy, lenders will focus less on your credit score and more on the rest of your financial profile: your income, your ability to pay your bills on time, and your ability make a down payment. Save your money, pay your bills consistently, and keep a steady job. Bad credit or no, you’ll likely qualify for a traditional loan after a year or two.
Get an interest-only loan.
Interest-only loans allow you to pay only the interest on the loan until you have a regular income to start settling the principal. This is a great option if you expect to earn a lot more in the next few years, or if your income is mostly in the form of infrequent commissions or bonuses.
Ask the government.
The Federal Housing Administration has sponsored programs that offer loans with very low interest. In the FHA’s 203(b) program for first-time homebuyers, for instance, your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. FHA loans may not take credit ratings into account as long as you have a regular income that can ensure consistent payment.
Looking for more options? If you haven't inquired recently, your credit score may not be as low as you think. Your best option is to consult with a real estate pro for guidance you towards the best goals and resources for buying your dream home.
If you have low credit and are looking into buying a St. Louis metro area home, contact your trusted agent for some standard information on lending in the St. Charles County area and recommendations for local lenders.
