Can I Buy a Home If I Have Bad Credit?
Filed Under Refinance
Owing a dream home need not just be a dream for all those who have a bad credit history. Though it is obvious that financing is almost essential for property investment, and that the financiers look at the credit history before releasing funds there is room for cheer for all those who are hung up with bad credit ratings.
Borrowers with bad credit ratings are never on the same platform as those with the good numbers as lenders who are willing to offer credit in spite of lower credit scores are few. Those lenders who are willing to fund a borrower with a bad credit rating are referred to as sub prime lenders and offer financing to high risk borrowers with rates and fees slightly on the higher side. The difference in the rate of interest offered is understandable as the lender’s risk is on the higher side. However certain sub prime lenders can demand exorbitant fees and rates and borrowers need to be careful about the same. The positive aspect is that there is enough competition on the sub prime lender’s front, and this would benefit borrowers who have done their bit of research in finding a reasonably sincere lender. The positive side in picking up loan from a sub prime lender is that you need not stay with them for ever. Lenders look at about three years of credit history and a re-financier who is convinced about the same may take over your loan from the first lender, thereby offering you better rates of interest and privileges.
Brokers are considered to be the most useful in sourcing a good loan for a borrower with adverse credit rankings. As a precaution the borrower should ensure that this broker has a reasonably large source of lenders and does not have any special tie-up with a single entity or individual. Real estate financiers also appoint a set of counselors who exclusively look into the requirements of clients with bad credit and help them with the best mode of borrowing. Buyers should avail this option as it allows them to directly interact with the financier’s representative and get hands on information abut the various options lying ahead of them.
There is another school of thought that argues that purchasing a home/land with bad credit may not be the best of ideas. It is felt that the borrower should first spend time in repairing the credit ranking, for let us say about a year, and then scout for a home loan. This argument is based on the fact that such a buyer is usually on the receiving end from his lender and this state can be avoided if he sincerely works towards repairing his credit status and find better lenders and rates in future.
Ultimately it is the priority that the buyer places on his real estate requirement that determines his timing of entry and the mode of finance chosen.
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