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Can You Buy a Home With Bad Credit?

By Mary Lamphere

If you are considering buying a home, and you have bad credit, you may be wondering if you should clear your credit first, or take the plunge into buying a home. Although it takes longer, waiting to repair your credit is usually the best option. However, if you would rather not wait, there are some options to consider.

Purchasing a home with poor credit will usually require you to pay a higher interest rate. Shopping around for the best interest rate will save you money.

One option to consider is Rent to Own . This is when you rent a home from a landlord who eventually wants to sell their home. The money you pay for your rent goes towards your down payment or overall price of the home. Consider all the terms and conditions in the contract carefully before going into a rent to own situation, they can sometimes be tricky.

FHA loans (Federal Housing Authority) are also another option. FHA loans are great buying tools for people with low income, no credit or bad credit. FHA loans are government backed loans, so a mortgage company has a huge advantage to loaning you this money. They have a guarantee of repayment.

Are you eligible for a VA loan ? If you served in the military, this may be the best option for you. Also government backed, this loan can work towards your benefit, if you have less than perfect credit.

After you have purchased home, you can begin to work on your credit and refinance when you have equity in the home and better credit that qualifies for a lower interest rate.

Cash-out refinancing is an option when you have gained equity in the home. You refinance your home for more than you owe, and pocket the difference. This may be ideal if you have some debts you would like to pay off quickly, invest the money, or pay off the home quicker.

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