Buying a Home with Bad Credit - FAST and Easy Approval

Описание: Many people dream of owning a home so that they can build equity and value and can stop writing rent checks to a landlord month after month. The problem a lot of people find is they have bad credit or no credit and feel they won’t be able to qualify. So the question is, how do you buy a home with bad credit?

Well luckily there is a way!

0:00 - Intro
0:34 - Understand your credit
The first step in all of this that may seem obvious, is understanding where your credit is at. A lot of people that tend to have low credit scores, don’t bother looking at their credit report because they know its low so why bother when it may just discourage them.

But don’t get discouraged! While you’re spending time repairing your credit, it actually may work to your benefit. Too many people rush into buying a home and the process ends up a lot faster than you would think. So even if you’re repairing your credit for 6 months, that allows you to take your time to look at house, understand what it is you like about homes, and understand what you’re likely to be able to afford.

3:44 - The penalty of a bad score
But at the end of the day, you should expect with a low credit score that you’re going to pay a higher interest rate. And since the interest payment is a portion of your mortgage payment, that means that the home you can afford will have to be less than what someone with good credit but similar income could afford. But don’t be down about that, try to use that as motivation and reason to fix that credit score.

Its also worth noting, that if you have a credit score below 500, its pretty much impossible to qualify for a mortgage.

5:31 FHA loans
An FHA loan is a mortgage issued by an approved lender, or bank, but instead of your lender taking all the risk, there's less risk because the Federal administration will pay the lender if you default on the loan. So now banks don’t have to worry as much about you missing payments. So typically, someone with as low as a 580 credit score can qualify for the loan and they would only have to put down 3.5% of the loan. So for a $200,000 home, that is 7000.

And even if you have a worse score that 580, you may still be able to quality. People with as low as a 500 credit score can qualify, but they will have to put down a 10% down payment. So now on that $200k house, you’d be putting down 20K. Which may be tough to attain for some, but at least those that have a decent income but made some mistakes in their past that caused a low credit score still can attain a home.

7:01 - The Catch to FHA Loans
Typically the catch is that you’ll have to pay special mortgage insurance. On a normal conventional loan, you’d have to pay private mortgage insurance if you put less than 20% down. And on a $200k home, that could be anywhere between $125 to $200 a month that you pay. This insurance doesn’t really benefit you though, it benefits the lender in the case that you can’t afford to pay your loan and you default on your mortgage. Now once the loan to value ratio falls below that 80%, meaning, that on this $200k home you only owe $160K, then you can get that mortgage insurance removed.

But with an FHA loan, the special mortgage insurance known as mortgage insurance premium. You have an upfront fee, which ends up being about 2% of the loan. So $4k for a 200K home. And this amount can roll into your mortgage sometimes. And on top of that, the second part is actually an annual fee that you pay every month. So you’ll end up not only having the same loan cost $4k more dollars, but every month your paying your paying an additional $150. but where as the private mortgage insurance can be eventually removed, on a FHA loan, that monthly payment has to be made for the life of the loan, or in some cases about half way through the life of the loan. So every month for 30 years, you're paying $150.

9:16 - How to get around FHA loan cons
Lets say your financial situation changes down the road and you have more savings, better credit, and more income. Well, you could try to refinance your loan into a conventional loan, especially if the new loan would be at a lower interest rate. Yes there may be some closing costs but if you’re saving $150 on not having to pay a premium and you’re saving on interests, it can be worth it.

12:20 - Special Options VA Loans
If you’re a veteran or an active-duty member of the armed forces, then you could qualify. A VA loan and allows any qualifying service member and qualified spouses to buy a home with absolutely no money down. Just like FHA loans, there are requirements and you’ll likely need around a 620 credit score.

13:11 - Special Options USDA Loans
The next option is a USDA loan. And this is for eligible rural areas and similarly, you’ll probably need at least a 620 credit score.

Hopefully This video helps one person out there!