When you want to purchase your first home but your credit is not the greatest, you might think that the chances for homeownership are slim to none. However, with the right information and some preparation, you can make homeownership possible. Here are some considerations to think about when you are trying to buy a home with no credit.
Save a Down Payment
There are many mortgage loans that don't require you to have a high credit score or good credit to get approved. For example, a government-backed FHA or a conventional loan are both options for you to apply for with a low credit score or bad credit. When you apply for one of these loans, you will need to have a down payment that may be a bit more than you would need if your credit score was high. One of these loans may also require you to have a certain amount of cash in your checking or savings account. However, by putting a larger down payment toward your loan or having a reserve of cash, you show the mortgage company that you have the funds available to put toward the purchase.
Start a savings account for your home purchase by putting away a percentage of your income each paycheck. You can set this up with your employer at times for a certain amount of your paycheck to get deposited into your savings account or you can arrange for an automatic transfer to occur withdrawing a specific amount of money from your checking account and into your savings account on each payday.
Improve Your Credit
Another option with buying a house with no credit is to improve your credit where you can to help improve your chances of getting a loan. With a poor credit score, you will be able to get a mortgage, but the interest rate will be higher than if you had good credit, which will cause your mortgage payment to be higher. And the cost of a higher interest rate will be more interest over the life of the mortgage. However, as you pay on your mortgage and work on improving your credit, you can refinance your mortgage at a later time to get a lower interest rate for your home, and as a result, pay less interest and a lower mortgage payment.
Take a look at your credit to analyze what is causing the low credit score so you can improve it. This may be due to a lot of credit card debt, late payments, or a collection. Work with the collection company to arrange a payoff to clear off the collection, and put any extra money you have to pay down your credit card debt.Share