It is possible to buy a home when you have bad credit. You can wait for a few years from being discharged in bankruptcy, check out lenders who cater to those with bad credit history, or opt for Lease Option Owner Financing. Once you re-establish good credit and can obtain a better credit rating, you will qualify for better interest rates when applying for home loans.
Getting a home of your own is not as difficult as you think it is when you have bad credit. Even after you have unpaid credit card balances or loans and declared bankruptcy, you can still buy your dream home. Consider the following options:
Wait for a few years after being discharged in bankruptcy
Most financial institutions and lenders grant you loan mortgages two years after being discharged of bankruptcy. This is particularly applicable if you have proven to better manage your financial obligations and you have established good credit in the past two years. Your loan interest rates will depend on your current credit rating, so make sure you pay your bills and other obligations on time.
Check out lenders who cater to those with bad credit
Lenders who cater to those with bad credit, otherwise known as hard money lenders, can grant you home loans as early as six months after filing your bankruptcy. However, expect a high interest rate on your loan and a down-payment of usually around 25 percent. Carefully study if you can afford to repay your loan. Do you have a stable job? Can your salary cope with your monthly loan amortization, as well as your other expenses? If you think you can afford such a loan without leaving behind your other needs, then you can go ahead. Otherwise, it would be wiser for you to wait for two years to take advantage of home loans with affordable interest rates.
You can find many hard money lenders in your area through your local directory or through the Internet. Search “bad credit mortgages Perth,” (Keyword/URL) for example, when in Perth. Make sure they are registered and find one that offers you the best deal.
Opt for Lease Option Owner Financing
Probably the best and the most affordable way to buy a home even with bad credit is through Lease Option Owner Financing. This is more like renting with an option to buy the house. What happens here is that you and the owner sign a contract that allows you to rent the house for two years or until you are qualified to get a loan and that you get to finally buy it at the price you originally negotiated. The good thing about this option is that the house is reserved for you so you can start making renovations as you wish. You are also able to save on the property’s appreciation, since you get to buy it at a price when you first rented the place or when you signed the agreement.
Re-establish good credit
Whatever option you choose, it is always wise that you re-establish good credit. Many financial institutions refuse to grant you home loans or charge you with higher interest rates when your current credit standing is still not better, following your bankruptcy. Always strive to give lenders the impression that you are capable of paying for the house that you are buying. Pay your bills on time, and do not forget to fulfill your other financial obligations.
No one is actually prohibited from offering credit or help to you even if you have bad credit. However, they are not obliged to lend you money if you want to buy a home. They have the option to accept or reject your request. To simplify things, you need to prove to lenders and creditors that you can manage your finances well and that you have improved your credit standing. This way, it will be easier for you to get your dream home even with a history of bad credit.