Did you hurt your credit when you were younger? Have you given up on your dream of ever owning a home because of your bad credit? I have good news for you: even people with credit that may not be perfect can qualify for a mortgage these days. Like anything worth having, it will take some work, but it will be so worth it in the end. Let’s figure out how to get this done.
Be aware of your credit score
Knowledge is power. Your first step is to find out what your credit score is and figure out what you can do right now to make it a little better. Get a copy of your credit report—some companies offer them to you free—and study it. Figure out what is an easy fix and what is not. It won’t improve overnight, but, at the very least, now is the time to stop doing things that hurt your credit.
A subprime mortgage is one that is generally offered to those with low credit scores when they do not qualify for any conventional loan. There are several different kinds of subprime mortgages to choose from, the most popular being the ARM or adjustable rate mortgage, also called a variable rate mortgage. These types of loans have an introductory interest rate that lasts for a period of time, after which it will be adjusted annually, based on the LIBOR (IntercontinentalExchange London Interbank Offered Rate.) This can be dangerous because, as your interest rate rises, so will your payments, possibly putting you in a situation where you are unable to make the payments. However, if you are prepared for this increase, it will be manageable and, the truth is, this may be the only open avenue you have for buying a home right now.
The bottom line
There is hope for you even if you have made unwise credit decisions in the past. Many lenders have become less strict about the numbers and try to look past them to the people. They realize in some cases that the credit score does not tell the whole story and that there are times when good, responsible people have had hard financial times and have made some bad decisions. It is key to clean up your credit starting right now and begin moving towards your goal of owning a home. You will get there sooner than you think.