Home Loan for Single Parent with Bad Credit
Many single parents have bad credit, so if you are in this predicament, you are in good company. You may have considered getting a house but wonder if there really is an available home loan for a single parent with bad credit.
Before applying for a mortgage, try to raise your credit score Remember that you will usually have to pay a higher interest rate if you have bad credit. Often, the interest rate is substantially higher which could make the price range of homes that you want unaffordable. Pay your bills on time for several months, and, if you have lines of credit with low balances, pay them off. DO NOT open more lines of credit such as applying for a department store credit card to get 10% off on your purchases.
One way to possibly get a home loan with bad credit is to look properties for sale that offer owner financing. This means that the current owner holds the mortgage on the property, so if you default, the property reverts back to him or her. You may also be able to negotiate a rent to own deal where a portion of your rent payment applies to a down payment on the property. Owners may be more willing to work with someone who fell upon a hard time such as job loss or divorce who is now stable but has a bad credit score.
Some lenders are willing to consider a home loan for a single parent with bad credit. However, there have been recent changes in the mortgage industry that make loans for people with bad credit known as subprime loans hard to get. Be sure to ask potential lenders immediately if they work with subprime loans so that you don't waste time with a lender that can't help you. If you do apply for a loan and get turned down, ask the lender what steps you should take to improve your situation and at what credit score or amount of debt paid off would they be willing to consider you for a loan.
Subprime loans often carry prepayment penalties which means that you will pay a fee which could be substantial if you decide to pay the loan off early. Some offer convenient refinancing if your financial situation improves. Be sure to read the fine print to select the best loan for your situation.
It is possible to get a home loan for a single parent with bad credit. You may have to take some time before applying to raise your credit score or accept a higher interest rate. But, if you continually improve your credit score and keep your employment stable, you have a good chance of getting a home loan in the future.