Georgia  Logo

Back

Buying a Home With Bad Credit: Your Options

By Tiffany Raiford

When it comes to age, most people consider it nothing but a number. Many people pay very little attention to numbers. One number, however, is so important it can affect almost every aspect of your life; your credit score. If you want to purchase a home in Georgia, you need good credit. If your credit is anything but stellar, however, it doesn't mean you have to give up your dreams of being a homeowner just yet.

Know Your Credit Score

Before you start applying for a mortgage with different financial institutions in Georgia, obtain a copy of your credit report from one of the three major credit bureaus. You need to know ahead of time what's in store for you when it comes to applying for a loan. You might think your credit is worse than it is or even better than it really is. What you need to know is your score. Each time you apply for a mortgage, your score drops. If you think your score is better than it is and you apply for a few mortgages only to be denied, your score is now worse. Knowing where you stand lets you know where you can apply.

Check for Accuracy

Now that you have a copy of your credit report, ensure that everything on the report is accurate. Even one simple mistake could cost you. If there are mistakes on your report, you'll want to have them corrected by the credit bureaus prior to applying for a loan. These mistakes could make the difference between a terrible interest rate and a more reasonable one.

Apply for a Subprime Loan

If you have poor credit, a subprime loan might be your only option when it comes to financing a mortgage. These loans are available to Georgia homebuyers, but beware of the fact that they come with significant drawbacks. For one, you must be able to afford the payments, which should be a given. Secondly, the interest rates that subprime lenders give to those who have poor credit are exorbitant. You will be required to verify your income and you should spend as much time as you can comparing the rates of subprime lenders to ensure you get the most value for your money with poor credit.

FHA Loans

If your credit is not perfect, but it's not terrible, you might qualify for an FHA loan in Georgia. Most lenders who offer FHA loans will consider applicants with scores as low as 640. When you apply for a FHA loan, you are more likely to be approved by a lender because the FHA guarantees that if you default on your mortgage, the lender will still receive the money from the loan. FHA loans require that you have steady employment, at least 3.5 percent down, and that you pay a one percent mortgage insurance premium for five full years. The mortgage limits are very low, which means you may not qualify for the home you really want. However, if your credit history is imperfect, this is one of the few options you have.

Buy With Cash

Cash is king, and having an abundance of it can make up for any blemishes on your credit report. This is the most straight-forward option of all: simply saving up enough money to purchase a home with all cash. Of course, this is easier said than done, and isn't a realistic option for most.

But the best option may be to simply repair your credit over time. Paying your bills on time, not overextending your credit, and spending the next year or two working on improving your credit can significantly raise your credit score. If you can afford to wait that long to purchase a home, you might qualify for a much better interest rate on your mortgage. However, if you cannot wait, there are still options available to you in Georgia.

Share this:

Comments

Leave a comment:

* Login in order to leave a comment. Don't have an account? Join for Free