In today’s real estate market, purchasing a home with bad credit can be a real issue for buyers. But not an uncommon one. Bad credit has affected many people looking to buy a property. And it can refer to a wide spectrum of marks against a potential buyer’s credit record: a past bankruptcy, foreclosures, delinquent credit cards, or no credit at all. Regardless, there are many options available to make home buying still possible.
With a massive recession and financial losses in employment and housing, the entire country’s financial health has been less than stellar. These days, seeing credit records that are less than perfect is no surprise to real estate professionals, sellers, or lenders. But, that said, such issues need to be addressed by a prospective buyer before making an offer on a property.
Once such issues are addressed, purchasing a home with bad credit isn’t impossible. But step one involves credibility. To be considered seriously by a seller, a potential buyer whose credit is bad must visit lenders before making an offer. This way, there will be no surprises about loan qualification capability or the loan amount possible.
At Red Blue Realty our expert team highly recommends beginning the buying process with a conversation between a loan expert and the buyer. This step should come before looking at the properties themselves. Financial experts can help with the mortgage process, by analyzing just how substantial a loan amount a buyer can qualify for, as well as by guiding a potential buyer through the credit repair process. This process can include applying for and paying off credit cards such as gas cards or department store cards; paying off any outstanding balances on credit cards; or working to eliminate any old black credit marks on a credit history. The goal of any lender is to improve a buyer’s credit score.
Re-establishing credit after bankruptcy is another bad credit issue which needs to be resolved prior to home purchase. Purchasing a home with bad credit and a bankruptcy is certainly not impossible, especially in today’s buying market. In fact, many sellers and mortgage lenders know bankruptcy situations can happen even if the buyer has steady work and acceptable credit. With upside down and underwater mortgages commonplace in recent years, bankruptcies have sky rocketed. Prospective buyers who’ve passed through a bankruptcy should wait to apply for a mortgage loan until two years after the bankruptcy discharge date. Then, buyers can contact lenders, and evaluate their credit reports.
Based on these credit report results, lenders can assess the amount of a loan available to buyers or work with them to remove any credit marks that occurred prior to bankruptcy that could still be on the buyer’s financial record.
We note that if a bankruptcy filing involved home loss, buyers should wait three rather than two years to look at financing options for a new property.
To avoid this waiting period, there are alternatives such as occupancy of a residence prior to closing, while making rental payments until a future closing date. Lenders will be able to discuss options with buyers, and selling and listing agents to reach the best solution for potential buyers.
Purchasing a home with bad credit is not an impossible task, but it’s best handled and overcome with expert assistance. Call us at Red Blue Realty and let us help you look at the options available to you today.