Are you a veteran and wanting to buy a home but have bad credit? If so, you are faced with a formidable task. It is not, however, a task that is impossible. Here are the steps you need to take when you want to buy a home bad credit or not!
Because you have bad credit you must understand that you may not quality for the home of your dreams. It is important to be realistic about what you are able to afford. Don't try to purchase a home that is too expensive for your budget. It is much better to have a smaller home in a less desirable neighborhood than to end up defaulting on the loan and losing your house. Run your numbers though Plus Mood's VA loan calculatortool to find out what you are able to comfortable afford.
Begin by contacting various real estate agents in your community to explain your situation. These companies will be able to quickly search the available properties in your area. Another good source is HUD, the U.S. Dept of Housing & Urban Development. They usually have many foreclosed homes for sale that are often offered at below market value.
The next step is to save money for a large down payment. Most conventional loans require down payments of between 10% and 20% of the final selling price. When you have a history of bad credit, however, lenders may require the minimum down payment to be even higher. That is why you should plan to save as much cash as possible. Make sure to look over you VA loan requirements for approval before you do anything further.
People who are able to save up large down payments are much more attractive to mortgage lenders, therefore plan to have a minimum of 20% to put down on your home --- higher is better. Also, plan ahead for your closing costs, expenses that must be paid out of pocket when your loan closes. Closing costs include things such as surveys, title company fees and appraisals.
You should expect to pay a higher rate of interest on your mortgage. For people with a poor credit score there is simply no way around this. Lenders equate poor credit with greater risk. Since the mortgage company will feel there is a greater chance they will not be repaid in full, they will likely require a higher amount of profit from your loan.
Don't take out a loan with an adjustable interest rate. This is important because today's low interest rates are likely to be raised in the near future. You would not be the first person with an adjustable rate mortgage who suddenly discovered their increased payment was suddenly no longer affordable! Remember, if you buy a home and lose it, your credit rating will be even worse than it was before you bought the home.
The key is to act responsibly. If you have bad credit you may still be able to purchase a home. Just plan on a smaller, less expensive home. Then plan on saving up a sizable down payment and on paying a higher rate of interest. If you are able to do these things, you can still buy a home bad credit or not!