When you have bad credit you need to know, ‘How can I buy a house with bad credit?’ You may have tried to find a lender who would risk lending money to you to buy a home. You may have found that you are denied the mortgage because you have a bad credit history. A bad credit history can be caused by a number of things. You may have experienced a financial setback caused by events outside your control. You may have unexpected medical bills; you may have divorced; or you may have lost your job. You may just have too many open accounts and you may have made late payments or missed payments. All these events will cause a drop in your credit score. When it drops below a certain point, then you will not be approved for a home loan through a traditional lender.
There are several options for purchasing a home, even with bad credit. MSN Money columnist Liz Pulliam Weston states that when you pay a higher rate of interest for a home mortgage this can translate into as much as $100,000 over the life of a 30 year mortgage. You can take steps before you apply for a mortgage that can help you qualify if you know that you have bad credit.
You need to ask for the free credit report from all three of the reporting bureaus. Experian, Equifax, and TransUnion have websites that you can go on and make this request. You are entitled to one free report each year. When you receive your report, review it for accuracy. If you find an error, dispute it. A 2007 Zogby study states that 27% of consumers checking their history found errors on their record. The Federal Trade Commission website recommends that you use annual credit report.com to request your free report each year. Commercial sites may require a purchase or a fee for the report.
You can try to settle up accounts that have been reported as late pay or missed pay. If a company wrote off an account that you did not pay, you may be able to contact the company, make the payment, and have the information reported to the credit bureau. Brigitte Yuille of Bankrate.com states that a lot of creditors will accept less than owed on the account and will remove the entry from your credit report if you pay the account in full. You need to make sure when you are negotiating that you agree to total removal rather than an entry that says ‘settled’. When this notation is on your report it will have the same red flag status as an unpaid account when a lender is reviewing your report. Get the negotiation agreement in writing before you pay the account.
Your score will repair itself as you work to pay off and close accounts that are open. Reducing your debt will help increase your score. Pay down the higher rate interest cards so you will have less debt. Thirty five percent of your credit score comes from the payment history section of your credit history. Keep the inquiries against your credit history to a minimum. The number of inquiries made count against you. When you shop for credit in a short period of time, this is recognized and is only counted as one inquiry. However, if you are opening several accounts at one time, then each will count as an inquiry. When there are multiple inquiries your score will drop. The perception by lenders when they see this type activity on an account is a red flag that the borrower is in financial difficulties and looking to credit to solve those problems.
If you have finished reading the above paragraphs you have the information you need to answer your question, ‘How can I buy a house with bad credit?’