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Advice for Home Buyers with Bad Credit

04/29/2010
In the not so distant past there was a chance that First Time Home Buyers with Bad Credit could find a lender willing to offer a loan to them. Alas, that was prior to the mortgage meltdown.

These days the exact opposite holds true. Many of the companies that specialized in such borrowers have completely shut their doors. In addition, conventional lenders have tightened their rules for lending.

The FHA lending program has followed suit by making it more difficult to qualify for a loan. In the past, credit scores were almost ignored in regards to obtaining an FHA home loan. The majority of lenders will now refuse a borrower to apply for such a mortgage if their middle credit score falls below 620.

To top it all off, the credit bureaus have made the scoring models more rigorous. This could mean lower credit scores for people who thought that their credit was in pretty good shape.

So, how can you take advantage of the new $8,000 First Time Home Buyer Tax Credit if your credit scores are not so great?
First, do everything in your means to raise your scores to the mortgage qualifying limit. This will not be as hard as you imagine.
Next, consider negotiating with a seller to finance your mortgage for 18 to 24 months while you work on your credit. This could allow you to take advantage of the First Time Homebuyer Tax Credit.

Using a lease-option contract to purchase a home will not allow you to claim the tax credit unless you find a way to finance the purchase of the home by December 1, 2010. But this could be a viable plan to help you acquire a home which you can later finance through traditional means after your credit scores are at an acceptable level.

It may seem like the credit is a tremendous windfall for First Time Home Buyers, but the real aim for most folks is simply buying a home. Therefore, take the necessary steps to get your bad credit in good shape so you can achieve the dream of home ownership.

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