Over the past three years housing prices in many markets across the country have declined dramatically. While this has left many low-cost options to home buyers, getting a mortgage with bad credit has become quite difficult. Luckily, there are still several ways a person with bad credit can buy a low-cost house.
Put More Money Down
The first way that you can buy a low-cost house with bad credit is by putting more money down and having more equity in the purchase. The main concern for lenders in lending to people with bad credit is that the person with bad credit will default and the lender will have to take a loss on the foreclosure. If you put down a sizable down payment, you will alleviate that concern and have a good chance of being approved.
Rent to Own
The second way that you can buy a low-cost house with bad credit is by negotiating a rent to own contract. With a rent to own contract, you will rent out the home for a few years prior to purchasing it. Over those few years, you will be able to improve your credit to the point to where you will qualify for a mortgage. You will also be able to lock in the low purchase price in this contract.
Accept a Higher Rate
The third way that you can buy a low-cost house with bad credit is by accepting a mortgage with higher rates and fees. Bad credit mortgages are far more expensive than traditional mortgages, but if you are getting a great deal on the low-cost house, accepting the expensive mortgage may make fiscal sense.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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