Can I Buy a Home With a Horrible Credit Score?
Reader Question: I have horrible credit ... can I still buy a home?
Let me start with the easiest and shortest answer and we will build from there. No, you cannot buy a home with a horrible credit score, especially not in this economy. In the past, you have had a slim chance of finding a subprime lender to offer you a loan in spite of having a horrible credit rating. Today, however, it's next to impossible. These types of loans and lending practices are practically extinct today.
A lot has changed over the last couple of years, and the economic nightmare is still unfolding before our eyes. Turn on CNN and see for yourself. The "easy lending" practices are of the 1990s and early 2000s contributed to the housing crisis we are dealing with now. Driven by limitless greed, the subprime lenders were giving loans to just about anyone who applied, including people with horrible credit scores.
The rest is history. These loans were unaffordable for the people who obtained them, but the problems were pushed into the future through the use of adjustable rate mortgages with low initial rates (a.k.a. "teaser rates"). When those ARM loans began to reset to higher rates, the foreclosure rates skyrocketed in this country. Long story short, these bad loans and record-breaking foreclosures led to the economic crisis we are now dealing with.
So my advice is not to try and get a loan with horrible credit (which is highly unlikely), but instead to focus on improving your credit situation. This is important to you now, but it will only become more important over the coming months and years, because lending standard are likely to get even stricter in the future.
Let me start with the easiest and shortest answer and we will build from there. No, you cannot buy a home with a horrible credit score, especially not in this economy. In the past, you have had a slim chance of finding a subprime lender to offer you a loan in spite of having a horrible credit rating. Today, however, it's next to impossible. These types of loans and lending practices are practically extinct today.
A lot has changed over the last couple of years, and the economic nightmare is still unfolding before our eyes. Turn on CNN and see for yourself. The "easy lending" practices are of the 1990s and early 2000s contributed to the housing crisis we are dealing with now. Driven by limitless greed, the subprime lenders were giving loans to just about anyone who applied, including people with horrible credit scores.
The rest is history. These loans were unaffordable for the people who obtained them, but the problems were pushed into the future through the use of adjustable rate mortgages with low initial rates (a.k.a. "teaser rates"). When those ARM loans began to reset to higher rates, the foreclosure rates skyrocketed in this country. Long story short, these bad loans and record-breaking foreclosures led to the economic crisis we are now dealing with.
So my advice is not to try and get a loan with horrible credit (which is highly unlikely), but instead to focus on improving your credit situation. This is important to you now, but it will only become more important over the coming months and years, because lending standard are likely to get even stricter in the future.
Labels: Credit scores
posted by Brandon at
10:34 AM
