Home ownership is the pillar of the American Dream. However, not everyone can afford this opportunity. According to recent figures by Statista, the average price for a single-family home has hit $408,800 dollars as of December 2021. It was $389,400 the year before.
The reason for this is that the demand for homes continues to outpace supply. This makes homeownership increasingly expensive, especially to home buyers with bad credit. The good news is that you can reach the American Dream even if your financial record is less than ideal. Here are a few tips you might want to try out as you search for the perfect home.
Get an FHA loan
The Federal Housing Administration runs programs aimed at struggling homebuyers. You can easily secure a home loan if you have a credit score of at least 500. In fact, homeowners who underwent foreclosure are also eligible under this financing option. Apart from this benefit, you also get a lower interest rate. While you are required to pay a mortgage insurance premium, you have up to 11 years to pay your premiums if you make a downpayment of 10% or more.
Take advantage of VA loans
Veterans can qualify for VA loans that are made available at more favorable terms. If you have served a minimum of 181 days of active service during peacetime and 90 days during wartime, you can tap into these loans. You just need at least a FICO score of 620 and above. Some lenders require an even lower credit score. In any case, VA loans give you the guarantee of homeownership even if your financial history doesn’t meet the standards for securing a conventional loan.
Get help from people you know
In case you can’t qualify for the loans above, you can always ask for cash from people you know. This works well if you are transitioning to a new job in another state. With this option, you will be able to afford a downpayment and move in as you wait for your first paycheck to arrive. It’s also ideal if you have bad credit or you can’t meet the minimum requirements of certain lenders. You only need to set up a system for tracking what you owe. Consider using platforms like Namma that allow you to pay back your loved ones.
If you think it’s too awkward to ask for cash from family members or friends, you can always crowdfund your home purchase. Platforms like Kickstarter or Patreon allow you to bypass the need to qualify under the strict financial requirements of most lenders. Through crowdfunding, you only need to reach out to strangers who can spare a dollar for financing your dream home. This doesn’t always work for everyone, but if you pitch your crowdfunding right and grow your network of donors, you will be able to earn enough to close in on your dream home.
Don’t let bad credit keep you out of the American Dream. Consider the tips above and see how you can make homeownership possible for someone like yourself.