Buying A House With Bad Credit
It used to be that buying a house with bad credit was nearly impossible but with todays high rate of bankruptcies and late payments due to the many layoffs and other effects of the sluggish economy it is possible – but may be very costly.
Be aware, however that your credit score will effect the interest rate that will be offered to you. If you have filed bankruptcy within the last 10 years, this will affect your score as well as any late payments.
Lenders rely heavily on your credit rating in order to determine the amount of risk they are at when they give you a loan. This only makes sense as the lender will lose a lot of money should you default on the loan and your past history of loan and credit payments reflects your future ability to make your payments on time or at all.
If you are buying a house with bad credit you can probably find a lender - try looking in our mortgage section where you can pick out a lender and even get a free mortgage quote.
As with most things in life, buying a house with bad credit, has it's price which translates directly to your monthly payments. Some think this is a small price to pay to have your own home and a means to establish timely payments and get on the road to a good credit rating. The lower your credit score, the higher interest rate you will have to pay. Your credit score is a calculation that banks make which factors in your outstanding debt, late payments, collection actions, the number and types of accounts you have and the age of the accounts. This information is applied to a formula and the result is a number that represents your "score".
How can buying a house with bad credit affect your bottom line?
Say you are borrowing $250,000.00 on a home. If your credit score is such that the best interest rate you can get is 6.8% you will be paying $131.00 more a month than if your score allowed you to get a 6% interest rate! If your score is even better and allowed you an interest rate of 5% this would save you $287.00 a month over the higher 6.8% rate!