So you want a home loan but you still have some stains on your credit? Well, it’s still possible to get housing loans with bad credit with some tips and tricks that we’re going to show you right here in this post.
Home loans and mortgages are the financial assistance you need when you’re buying your home. And having bad credit slows down the process of getting this loan or makes it an excruciatingly painful process.
In many cases, some people don’t even bother applying to get the loan because they believe there are no housing loans for people with bad credit, and they will not get approved at all.
However, it is important to establish what bad credit is and if what you have is really bad credit. Do you pay people late? Or do you have a large debt on credit cards and you’re close to the limit.?
A bad credit score can be a result of different things: late payment, no payment at all, unpaid student loans, etc. All of these appear on your credit and can give you a very low score. Therefore, the first thing is to determine what kind of bad credit you have. Whether it is from late payments or no payments at all. You can ascertain this by going through your credit report to see what it says and what your score is.
During the home loan process, a qualification review will be carried out by your lender. This is when you tell your lender everything about yourself: name, occupation, social security number, date of birth, the type of accounts you hold, etc. This is the initial application you put to the lender.
No part of this process is aimed at just prying into your life and unearthing information about you. Your lender is just trying to find answers to an important question, which is “can you pay back this loan?” Knowing what your lender is looking for helps you understand the process better.
There are various types of lenders who can give you a house loan but if you have bad credit, and you’re wondering if there are HUD housing (FHA)loans for people with bad credit, it is advisable that you go to a mortgage lender or mortgage broker who only handles mortgages. This is because, with other institutions like banks, mortgages are not their only source of income, therefore, it might be extremely difficult to get housing loans with bad credit. Your chances are low.
Banks do not have a provision for housing loans for people with bad credit, but mortgage brokers and lenders do. They have the time and right resources to help you.
What is the lowest credit score you can have to get approved for HUD housing (FHA) loans, for people with bad credit?
You have to have at least a 500 credit score to be considered for an FHA loan. You have 3 scores, the median score is what will be used. The loans are approved in 2 ways: automated approval and manual approval.
With an automated approval, all of the data on your application is put into a system that all mortgage lenders have, it is run through and weighed (your credit score, credit history, type of property, etc), the system then marks your application as:
a. Approved eligible,
b. Refer eligible, or
c. Refer with caution.
“Approved eligible” is the most preferred response. It says that your information is sufficient and you should be fine. A “Refer eligible” status means that you have to be assessed and scrutinized again because it is a little dicey.
With a “Refer eligible” status, there is still a possibility of getting through.
A “Refer with caution” status is bad news. It is as good, or as bad as a point-blank no.
How to buy a house with bad credit
Buying a house with bad credit can seem quite daunting. This is because every lender will look at your credit before deciding if you qualify for their loan or not. And they’re likely not going to give you a favorable response if your credit does not look good.
Now the question is, “can you buy a house with bad credit?”
Even though buying a home with bad credit is hard, it is not entirely impossible.
The best tip on how to buy a house with bad credit is to find people who are in bankruptcy, foreclosure, pre-foreclosure, divorce, or other property problems. These people can sell their property to you and leave the mortgage in place, this way you have a house without having to get approved for a mortgage loan or even deal with banks at all.
You are helping people in situations where they can’t keep their properties, at the same time, securing a property for yourself without having to spend money or face the risk of applying at any bank for a loan.
By seeking out these situations and taking good advantage, nothing can stop you from buying a home, even with bad credit.
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