A big part of the “American Dream” is buying a house on American soil. For many people, buying that house is considered a normal part of life. For others, it presents a big challenge. One of the consequences of having bad credit is having great difficulty getting credit of any kind for an extended period of time. That is particularly true for someone who has gone through a recent debt settlement negotiation or bankruptcy, but still wants to try to buy a home.
Buying a Home is Still Possible
If you have had recent financial difficulties and feel like buying a home is near impossible, you might want to do a little investigation. What you will find is there is more than one way to skin a cat. The fact is there are several home buying options available for people with bad credit.
To be sure, it is not going to be an easy process. However, this is America, the “land of opportunity.” People tend to get second chances when they start doing and saying the right things. If you need help getting yourself back on tract, you might consider contacting a reputable debt management company like Rescue One Financial. Not only can they help you address your debt issues, but lenders might recognize the fact you are working with this type of company, which supports the notion you are serious about your financial future.
Taking Care of Business
If you want to set your sights on buying s new home in spite of your financial handicap, you need to start by making sure you are doing all the right things. These right things include:
- saving money to be used for a down payment.
- paying all your bills on time to establish you are now a good paying citizen.
- applying for a new credit card so you can begin reestablishing or rebuilding your credit score. If you just went through bankruptcy, you might be interested to know getting a credit card is quite possible. Credit card companies will recognize you have no debt and can’t file bankruptcy for 10 years. That’s not a bad position for major credit card company.
Applying for a Loan to Buy a New House When You Have Bad Credit
You should know right up front that Freddie Mac and Fannie Mae have very strict standards that will most likely eliminate the feasibility of you securing a conventional loan. However, there are plenty of loan programs available for people who are financially challenged. Take a look at these options.
- The FHA – While conventional lenders typically require a four-year waiting period between a discharged bankruptcy or foreclosure and applying for a home loan, the FHA only requires a two-year waiting period. Even better, the down-payment requirement might not be as big as you thought it would be. Finally, the applicable interest isn’t going to be as punitive as it would be with other types of lenders.
- Hard Money Lenders – This might not be the best option, but it is an option. Hard money lenders are in the business of making high risk secured loans. In exchange for the risk they take, they will typically offer a loan with an interest rate that sits well-above current market rates. The loan terms will be slanted in the lender’s favor and the down-payment requirement might go as high as 40%. The good news is a hard money lender is usually willing to give you all due consideration after a short six-month waiting period following a bankruptcy or foreclosure.
- Cosigner – If you can find a family member with strong credit and a willingness to vouch for you financially, you could put yourself in line for a home loan with a decent interest rate and reasonable terms. It is very important you recognize that the cosigner’s name is going on the same loan document and deed of trust. Should you encounter further debt problems and miss a payment or two, their credit is going to also be adversely effected by your actions.
If you are serious about buying a home after great financial difficulty, you would be well-served to schedule an appointment with one of our professional debt counselors here at Rescue One Financial. During the initial consultation, they can help you better understand your available options and offer advice as to which ones might be best for you considering your current situation.