It might sound like a daunting task, but fortunately it is possible. If you are hoping to invest in real estate but are worried about your low credit score – here’s our guide to buy a house with bad credit.
No two situations are the same, but in most cases the minimum credit score needed to buy a home in Michigan is roughly 600. This is the bare minimum when looking to get any type of loan. However, cash is your best friend when you have bad credit and the more cash you can put toward a down payment, the better. So even though your low credit score might only qualify you for a less than desired loan amount – you might still be able to afford the home you want if you can cover the difference with cash.
Outside of your actual score, lenders will also be looking at things like:
- How much you have available for a down payment
- your overall amount of debt
- If you have any debts in collections.
The lender you end up with also plays a factor in the big picture because they all have different requirements. So even though you can get a bad credit loan – be prepared for a higher monthly mortgage payment due to higher interest rates.
But don’t forget! – if you buy a house with bad credit, you can always repair your credit and refinance for a better rate later on.
Having bad credit doesn’t mean you can’t enjoy the benefits of homeownership. Instead, it might just require some additional research. A realtor will have the knowledge and experience to help you find the best deals, work with the right lender and get approved for a loan that fits your situation.
Ways to fix your credit score
1. Pay your bills on time. Late payments can have a negative impact on your credit score. Make sure you are paying all of your bills before their due dates to avoid any late payments.
2. Keep your credit card balances low. Having a high balance on your credit cards can lower your credit score. keeping your balance around 30% of your overall limit is a good place to be.
3. Monitor your credit report regularly. Make sure that all of the information on your credit report is accurate. If there are errors, contact the credit bureau to have them corrected.
4. Consider a secured credit card. This is a credit card that requires a cash deposit. If you make all payments on time, your credit score will improve.
5. Pay off any outstanding debt. Paying off any outstanding debt will help to increase your credit score.
6. Pay down any loan balances. If you have any loans, try to pay them down as quickly as possible.
7. Avoid applying for too many new credit cards or loans. Each time you apply for new credit, your credit score can be lowered.
By following these tips, you can improve your credit score over time and reach better financing for your mortgage. Good luck!