While buying a new home with a low credit score can be difficult, it's not impossible. There are a few things you can do to help improve your chances of getting a mortgage and buying a home that's right for you. Work with an experienced real estate agent, and use the following tips as you search for a new home.
Work On Your Credit Report
Your credit report contains valuable information you can use to improve your chances of getting approved for a home loan. Request a copy of your credit report from all three major reporting agencies, and go over each item carefully. Check for errors you can dispute or fix, and attempt to lower your overall debt before applying for a home loan. You'll also want to avoid applying for new credit accounts and loans in the months before you begin looking for a new home, as this can negatively impact your score.
Build Your Savings
You may be more likely to be approved for a home loan if you provide a larger down payment. Your real estate agent can help you determine how much you might need to put down based on your credit history. You can also schedule an appointment to speak with a loan officer at your bank to discuss your various options. The loan officer can provide additional guidance for the percentage of the home's purchase price you should have ready to put down on a home. As you plan your savings, remember that you will also need money set aside for closing costs, home inspections, and other incidentals. Don't assume that every penny in savings will be free to go toward your down payment.
Delay Your Purchase
If you are able to pay down your debt and you have time to work on your credit before buying, consider delaying your new home purchase. The better your credit history is, the better your odds are of getting approved for a mortgage. A better credit score can also help you qualify for a lower interest rate, which can make the overall cost of your new home more affordable. If you are unsure how long it will take to repair your credit, consider working with a credit counseling agency. Typically, these agencies can help you consolidate debt, remove errors from your credit report, and help you improve your credit score.
Have an honest conversation with your real estate agent and your loan officer about your current credit and financial status. You may find that you are able to work with both parties to get a new home you can afford, even if your credit is less than perfect.