Buying a Home With Bad Credit: Tales of Success

Owning a home is on the short list of lifetime dreams and accomplishments. But after hearing horror stories about the details of the mortgage process, some people hesitate to even attempt to apply for a home loan. And those who have had past financial problems believe that buying a home with bad credit is impossible, so they don’t even think about trying.    

But even if a home loan is not approved on the first try, it pays to apply with another creditor that will be open to saying yes. There are countless lenders that offer mortgages specifically for buyers with bruised credit or other financial situations. Although some facts have been changed, these stories of successful buyers are true.

Topics:

The Unpleasant Surprise

This story is about a woman who waited to buy dream home for many years. She had a very good job for about ten years and a decent amount in savings. She prepared for buying by researching homes in the area she wanted to live and using mortgage calculators to plug in her income and down payment. 

Finally, she went to her bank to apply for a mortgage. She brought as much documentation as she could from the list she found on the internet. A few minutes later she was told her application was denied and she left the office in complete shock. She was totally unaware that her credit score was 580.  Discouraged, she concluded that it wasn’t in the cards for her to own a home.

Although she did do some preparation in advance, some of the reasons for her unpleasant surprise were:

  • She did not check her credit score with all three reporting bureaus before she applied. Borrowers should always pull their own credit report far in advance of the lender taking a look. There could be errors that need to be fixed or debts to pay that can boost the score. Or they may discover they have excellent credit, which can expand their financing options.
  • Another mistake was to assume her bank would approve her loan because she held accounts there for many years. She never considered applying at any other establishment. Even after she was denied the loan, it did not occur to her to try other lenders.
  • She was unaware that there are a number of unique ways to get buyers (even those with bad credit) into a home of their own.

Ultimately, the story ended well for the buyer. She spoke with a trusted friend that had a similar experience who advised her to perform some due diligence and keep her dream alive. The buyer spent the next several months preparing to reapply. She pulled her credit reports and fixed errors that she did not know were there. After comparing lending options, she found a mortgage company willing to approve her for a home despite her credit score. 

College Student Homeowner

Most college students live in dorms or at their parents’ homes to save money. Very few college age people dare to believe that they can own a home while they go to school. This story illustrates another way bad credit, low income, or no credit can be overcome in a creative manner.

The ambitious college freshman wanted to live away from home as she attended school. She wanted to buy a house of her own and applied for a mortgage loan. She hoped that income from her part-time job and a small savings would be enough to get her approved. Unfortunately, she was turned down because of low income and insufficient credit history.

Today, this young woman still lives in the home she has owned since just before her first year of school. How did she get a mortgage? Since she had always been responsible with finances, her parents were willing to help. They met with her and the lender to discuss some viable options, one of which was for the parents to give her their life savings. They had enough to pay well over half the cost of the house.

Although she could get approval for the remaining cost, it was agreed this would not be in the best financial interest of the parents, who would retire soon. But the lender was able to give the student a loan if the parents co-signed on the mortgage, which they agreed to do. The daughter agreed to an auto debit of mortgage payment from her checking account each month to ensure she paid on time. Happily, this arrangement has worked out fine for the entire family.

Doing Homework

This is the story of a couple that looked forward to owning a home after renting for many years. A savings account was opened, and the couple began to put away money towards the down payment on a house. About a year later, the wife lost her job and they began to dip into the savings to make ends meet.

It took another year for the wife to find another job. But in the meantime, they had to run up their credit cards to pay bills and for other living expenses. They were late making payments once or twice, and most of the credit cards were maxed out. Still, they were determined to buy a house once the wife started bringing in a steady income.

Their credit scores had taken some hits, and they were denied a mortgage on their first try. Rather than give up, they decided to meet with a lender to give them an idea of what it would take to get a loan approval. The lender ran a credit analyzer program that produced a game plan to raise their scores. Their financial homework included:

The couple did everything they were told to do. Almost immediately, their credit scores jumped up to numbers that the lender was able to work with to facilitate a loan from one of many home loan programs that were available. Getting sound financial advice, following that advice, and being patient were the means used to get this couple moved into their own home.

Key Points

Buying a home with bad credit is not unusual. These are just a few success stories; millions of homeowners get approved with low scores or no credit history. But there are some differences between getting traditional home loans and mortgage approval for people with bad credit. The key points to understand when trying to buy a home with bad credit include:

1. The borrower may be asked for a larger down payment

2. Interest rates are higher for buyers with poor credit

3. Loan scammers look for desperate home buyers – lenders should be researched

4. Buyer may qualify for government programs for low income, veterans, first-time buyers or other situations regardless of credit score

5. A denial does not mean homeownership is not possible

There are many ways to get a home loan approved depending on the individual. All borrowers should know their credit score in advance so they have an idea of their chances for approval. If necessary, a borrower can get help from friends and family to get a home. Sometimes, time and patience is needed while doing the work to get finances in order. The goal is to get the keys to the home whatever it takes.

Even if you have less than perfect credit, our partners can help you obtain a great mortgage with easy approval.

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 2

No votes so far! Be the first to rate this post.

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Sheila Kay

Author

Sheila Kay is an author, ghostwriter and editor residing in the Atlanta, GA area. Among her favorite writing genres are creative nonfiction, self-improvement, and finances. Her first published book, PTSD and the Undefeated Me, is a memoir which has been a stepping stone to her involvement with mental health advocacy for military and civilian men and women. She is currently working on the first fiction novel to be published under her name. For more information or to purchase her books, visit Sheila’s Author Page on Amazon.com.

Categories