Having bad credit is like anything else in life. If you want to fix it you need to start working to repair it as soon as possible. Although it may seem hopeless start out by doing anything you can to fix the situation. If you have a lot of debts in the form of credit card balances, car loans, student loans etc. you can consolidate these loans into one monthly payment which can be lower then the sum of each of the bills combined. The best way to do this is to contact a debt consolidation company to help you renegotiate all of your outstanding debts. Once you are able to show that you can repay the smaller loan amount you will be well on your way to fixing your credit issues.
Now that you have a smaller debt amount to repay you may be in a better position to save some money for a down-payment. This is really important since the days of being able to purchase a home with no money down are largely gone or are reserved for people who have exceptional credit scores. Speak with your financial institution or a mortgage broker but in general you will need to have at least five to ten percent of the purchase price as your down payment. This may sound like a lot of money but if you cut out all of your unnecessary expenses and put that money aside you will be surprised just how quickly that money will add up. Also keep in mind that you will need a little extra money to cover all of your closing costs.
Interest rates on available mortgages are another thing that you will need to consider. A couple of years ago lending institutions were offering record low rates and that make home ownership very affordable however in today’s economic climate things have changed a little and interest rates have gone up a bit. While still affordable it can have an effect on the purchase price you will be able to afford. One way to save money on your monthly payment is to go with a variable rate mortgage. This means that if interests fall over time your monthly payments will also fall. On the other hand should rate rise your payments will also increase. While there is a bit of risk in take a variable rate mortgage in general over time you can save quite a bit of money on the interest you pay on your mortgage.
One last thing to consider is to try to find a seller who is willing to mortgage either all or part of the property to you directly. This is sometimes referred to as a vendor take back mortgage and can allow to you to purchase a home that you would otherwise not be able to qualify for from a traditional lender. The most common way this happens is when a seller is willing to give the buyer a second mortgage on the property in a addition to a regular first mortgage from the bank. Since the bank is holding a smaller mortgage amount the buyer can often buy a higher priced property. When mortgage rates are fairly low however this option can be hard to find.
In the end your credit score is a very important factor in your ability to purchase a home therefore anything you can do to fix your situation the easier the whole process will be. This coupled with the strategies outline here and home ownership could be just around the corner. Keep in mind that even the worst credit or financial situation can be fixed but you have to start today and be committed in order to be successful.
Stefan Hyross is a writer on the Canadian housing market with a focus on Square One condos and other real estate issues that effects home buyers and property sellers.