First Time Home Buyers with Bad Credit

Bad credit was already bad enough for getting a loan approval, but this situation has been compounded by the sub-prime crisis in the United States. Most of the big lenders have gone bust, so there is a scarcity of lenders anyway. Adding to that, those institutions that have braved the crisis and managed to survive, are looking to learn from the mistakes of those lenders that perished, and are severely rationing lending to people with good credit, let alone those with bad credit. Mention the words 'home loan' and the lender is probably going to shut the door in your face. So who is going to give mortgage loans for first time home buyers with bad credit? Are there any government programs for first time home buyers with bad credit?

Home Loans for First Time Home Buyers With Bad Credit

Although few, there are still some ways of obtaining finance for first time home buyers with bad credit.

Improve Your Credit Score
Well this might sound like the most obvious way, but rest assured, it is the best. Improving your credit score will help you access finance very easily. Plus you have the added advantage of appearing to have 'reformed', so banks might just consider that. So, if you have a poor credit rating right now, you can improve it by paying off all your old credit card debts, and cut down the use of credit cards altogether. There are other many simple things you could do to look like a responsible citizen. Like getting your name on the electoral roles, paying all your taxes, etc.

It might take around 6 months to 1 year to clean up your credit rating depending on what your score is today. Look at it as an investment which will bear you returns in the long run. Cut down shopping binges and other discretionary expenses. A year of cut-backs will give you benefits later.

Short-Term Finance
A faster way of obtaining grants for first time home buyers with bad credit is to convince a seller (or someone you know) to pay your mortgage for 6 - 12 months while you clear up your credit history, and then pay him back once you get your loan sanctioned. But all the while, you have to make an honest effort to clear up your credit history, otherwise you loose the faith of the person who is ready to finance you in your time of need.

You probably get it by now, that there is no real alternative to improve your credit rating. There may be more ways, but there is one more reason why I recommend this way.

You might know by now that those with a bad credit rating get loans at a higher rate of interest. How much higher? Up to 2% higher. And for long-term loans, that 2% is going to accrue a lot. So if by improving your credit score, you can get a loan easily and that too at a cheaper rate of interest, why not?

So, these are the options for first time home buyers with bad credit. Bad credit is not exactly an indelible mark on a person's history. It is a tough stain, but certainly can be removed with some effort. Firstly you have to change your mindset. Learn your lessons. Getting credit is great, but is it always necessary? Why not prioritize your expenses and cut back accordingly? It is going to take a lot of work to improve your credit history, so perhaps now you will value it more and use it judiciously.