A lot of people think that bad credit completely destroys your ability to buy a house. Let me step on that theory.
I was 19 when I purchased my first home, I had 2 debt collections the same year and I was behind on some creditor payments, and had plenty of overdrafts at my bank. Then I got with a great mortgage officer named Dora. One might say, Dora was a great Explorer because she was fantastic at suggesting what to do to get rid of problems on my credit report to get qualified and quickly go after my first home (the search only took a few months).
Before I jump in those few months of attacking the problem items. I do want to mention 1 thing, if you get a family member or friend to gift you funds or you have a legitimate way of paying off mass amounts of debt easily and be able to prove where it came from. You may be able to get your mortgage company to use quick turnaround credit score programs that can update your credit report in as little as a few days to a week.
Alright, now then…Throughout those few months of getting my qualifications prepared, my mortgage officer said:
- Pay off the debts
- Get someone to gift you the funds to pay them off
- Or at the very least get the payment plans up to date
- Write a letter for the mortgage company with receipts showing proof of balances paid off
- Get my income under a W2 (at the time I was an IT contractor but pushed to get converted to an employee to ease my eligibility)
…And IT WORKED! Within just a few months, my credit score went from upper 500s to lower 600s and I was able to qualify for a $120,000 foreclosure in a nice neighborhood that enabled me to start my real estate interests and provide wealth & automated income for myself & my future family.
There you have it, a quick and dirty way you can qualify for a home with bad credit.
In foundational terms, buying a house is similar to buying a car because there is lots of documentation to sign, and the bank only REALLY cares that you can pay the monthly & down payment.