Most home buyers have plenty of worries about buying properties. One of the first things you think about is whether you can afford it or not. You might want to sell your property because you need a budget to buy a new house. Can you do this even if you have poor credit?
Most homeowners are very wary of their credit scores. Having poor credit scores makes it quite difficult to buy houses. It’s because most lenders and financial institutions are strict about the credit score ratings of their clients.
The question is, can people who buy houses with a poor credit score? Yes, you can, but it will take a bit of understanding on how you can qualify for a mortgage. You will also need to find ways to raise your scores just in time for buying a new property.
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How Selling Your House Can Affect Your Credit Score
When you sell property, it would directly impact your credit score. It’s because it can influence how you can pay for your debts or invest in new property.
- The good side is that now you have the finances to buy a new home.
- The downside is that it won’t affect the payment history seen in the property’s mortgage. It can also be risky to short sell your home, especially when you already have bad credit ratings.
Your credit scoring depends on the mortgage payments that you make. Lenders will check your credit report to see whether you have a good track record on your mortgage payments.
When you sell your property, you also lose your mortgage. Thus, lenders won’t have current measures to track your credit report.
If you are worried about the sale of your house affecting your credit score, you won’t have to since the effect is little to none. Even though it will impact lenders, it won’t change your actual credit score.
When you sell your property to buy a new house, you can use the money for your next home. You can either put it as a downpayment or manage your other debts. If you opt to pay off your mortgage with the money from selling your house, that could affect your credit score.
Remember that the change would only be small, and if you want a significant difference in your credit score, there are other ways. You could boost your score by paying debts or cards closest to their limits.
Buying A Property With Poor Credit Scores
When deciding to buy a property with poor credit scores, you have to remember that most lenders don’t have specific credit scores for all their clients.
Lenders can set their terms regarding your credit score. Usually, you will find some lenders agreeing to work with people having a lower credit score.
The Process Of Buying A House With Bad Credit
Bad credit is usually associated with scores below 670. That score is considered subprime or bad, while scores regarded as poor fall into around the 500-600 category. Even if you have poor credit, that doesn’t mean that your credit is the same as another person’s bad credit.
Factors That Would Affect How You Buy Property
How Much Debt Or Payments Do You Have
Lenders are concerned about your capability to pay off your debt. They will check if you have been paying on time and how long it takes for you to finish off your bills or debts.
When they see that you are doing well with paying on time, it will help convince them to give you the loan that you need.
Financial Capability And Earnings
Lenders will also look at your financial capability and earnings. They will check whether you have enough income to pay for your mortgage and your other debts.
Each lending company has its own terms and conditions. That is why the amount you earn might pass for some companies and won’t for others.
Whether the lender will approve your application or not depends on the number of payments you have and how much money you make. If you are interested in getting financing from a certain lender, always look at their requirements beforehand.
Being Able To Pay For Downpayment
Lenders will also want to see if you have the money to pay for a property’s downpayment. Some lenders will agree to help finance your property downpayment for you as long as you have a certain amount of cash in hand.
That’s why it’s essential to have money ready to show to the lenders. Having extra cash in hand to present for a certain amount of downpayment can help convince lenders to approve your request.
Having Cash To Raise Your Credit
Even though you might have a low credit score, if you have cash in hand to pay for any difference on the mortgage or downpayment, it could help. Lenders want to see if you can cover even the slightest difference to finish your outstanding debts.
When you have bad credit but have cash, you can cover payments. Once you can pay specific amounts with money, it could help raise your credit score, and you could even qualify for other types of loans.
Getting Help From Companies That Buy Homes For Cash
If you are still having trouble raising your credit scores and getting the loan that you need, calling companies that buy houses for cash might help you out a lot. Those companies could buy your home for you and pay you in cash.
Companies that buy homes for cash can buy your house as fast as a day or a week. It depends on the company’s offer and the terms you have agreed.
You don’t even need to renovate or repair any part of your house. Most companies that buy houses for cash will take your property as-is.
You won’t have to worry about how to sell your house fast. These companies are pretty helpful if you are struggling with your credit scores. You can then use the cash paid to you to cover downpayment or settle debts to increase your score.
Once your credit score is raised, you can qualify for higher loans or loans you have targeted before.