B4 • Friday, September 9, 2022
THE GARDEN ISLAND
thegardenisland.com
How to buy a house with bad credit
Step two: Do what you can to raise your score Unless you’re in a rush to buy a home immediately, take some time Buying a home is integral to the to improve your credit score as “American Dream,” but it is inmuch as you can. Five factors decreasingly out of reach for many hard-working adults. termine your score. From most to The property market has been least critical are your payment hishighly competitive over the last tory, outstanding debts, length of year because housing supply has your credit history (how long shrunk dramatically. Now, many you’ve had your cards), types of adults have given up on owning a credit you’ve used, and amount of home and expect they’ll rent for new credit. the rest of their lives. While most of You can sign up for a credit monthe older generations will have itoring service to help you keep their own homes through retiretrack of it all. An app called Smartment, less than half of the largest Credit offers a paid service and is group in the workforce - Millennials one of the more helpful options. MATT ROURKE / ASSOCIATED PRESS FILE - think they’ll have that same luxYou can also use free tools, alury. though they aren’t as in-depth. A “sold” is posted outside a single family home in a residential Despite their pessimism, a comCredit Karma is one example. It can neighborhood, in Glenside, Pa. flag which credit factors are hurtpetitive market doesn’t mean it’s FHA-approved lender. impossible to own a home - even if based on the market thereafter. ing or helping you the most, but it ARMs are better for people with a Now that you know the various you have bad credit. won’t give you detailed tips on how credit score of 600 or higher. That loan options, it’s time to take a look to fix those issues. But what is a bad credit score? difference between 600 and 620 at the steps to getting there. Credit scores are usually based Step three: Talk to a might not seem like much, but it on the FICO scoring system, and Step one: Get your free credit professional different credit bureaus may grade can help someone who needs it. report When market rates are lower, the scores differently. This is how ExThe best person to go to is a Deinterest on your loan will also be The last thing you want is your perian ranks them: partment of Housing and Urban Decredit score to be misreported. Go velopment ( HUD)-approved Poor: 300-579 Fair: 580-669 Good: lower. The drawback, however, is to annualcreditreport.com - you 670-739 Very Good: 740-799 Excep- that if rates are high, you will pay housing counselor. The governcan get a copy of your credit report ment trains these counselors, spetional: 800-850 About a third of con- more too. You’re at the mercy of the economy - you could save for free every year. Review all of sumers have a poor or fair credit cifically the Department of Housing money on the interest rate or lose the information provided. Is your score. If you fall in that category, and Urban Development. Their job some. social security number accurate? don’t give up on homeownership. is to help you find affordable, qualIf you have a score as low as 500, Are your addresses up to date? Some loans cater specifically to ity housing. They’ll get to know you you could qualify for a Federal Which debts and transactions are Americans with low scores . and your situation, so they’ll be Housing Administration (FHA) causing you to lose points? able to find local options that suit Mortgage Options loan. FHA loans will cover about 97 If anything looks inaccurate, your situation. reach out to your lender. It could A traditional mortgage is usually percent of your home’s value , so you’ll need to make at least a 3 per- be something as simple as a paper- Step four: Enroll in a a fixed-rate loan, so the interest rate never changes. Although this cent down payment. And until you work mistake or as serious as iden- homebuyers workshop is the kind of loan people typically pay off 20 percent of your home’s If you can get into a course lotity theft. Work with your lender to think of, it’s only ideal for people value, you’ll have to pay for private get some documents proving the cally, it should be free. You can also with a credit score above 620. mortgage insurance. This covers error, and reach out to the credit do it online at your own pace. HowBy contrast, an adjustable-rate your lender in case you default on reporting agency with the eviever, there will probably be a mortgage (ARM) typically has a set the loan. dence. The Federal Trade Commis- charge for this. Once the course is interest rate for the first three to Since it’s a government-backed sion even offers a sample letter you complete, you’ll get a certificate seven years but then fluctuates program, you’ll have to go to an you can use when you apply for fican use to dispute any errors. Gillian Manning WEALTH OF GEEKS
Long-term mortgage rates now at highest point since 2008 ASSOCIATED PRESS Average long-term U.S. mortgage rates jumped again this week, hitting the highest levels in almost 14 years and pushing even more would-be buyers out of the market. Mortgage buyer Freddie Mac reported Thursday that the 30-year rate jumped to 5.89% from 5.66% last week. That’s the highest the long-term rate has been since November of 2008, just after the housing market collapse set off the Great Recession. One year ago, the rate stood at 2.88%. The average rate on 15-year, fixed-rate mortgages, popular among those looking to refinance their homes, rose to 5.16% from 4.98% last week. That’s the first time the 15-year rate has been above 5% since 2009, as the real estate market went into a yearslong slump. Last year at this time the rate was 2.19%. Rising interest rates — in part a result of the Federal Reserve’s aggressive push to tamp down inflation — have cooled off a housing market that has been hot for years. Many potential home buyers are getting pushed out of the market as the higher rates have added hundreds of dollars to monthly mortgage payments. Sales of existing homes in the U.S. have fallen for six straight months, according to the National Association of Realtors. Mortgage rates don’t necessarily mirror the Fed’s rate increases, but tend to track the yield on the 10-year Treasury note. That’s influenced by a variety of factors, including investors’ expectations for future inflation and global demand for U.S. Treasurys.
nancing. The HUD counselor should be able to help you with this.
Step five: Look for FHA loans As mentioned earlier, Federal Housing Administration (FHA) loans are the best option for someone with poor credit. The loan won’t come directly from the FHA but through an approved, private lender. Your local HUD office should be able to find the best option in your area. Make sure you have enough funds to cover the down payment and the mortgage insurance fee. Step six: Try to get preapproved Like any other mortgage, you can get pre-approved for an FHA loan. Pre-approval can help you save time and narrow your search as you look for a home. Like an approved counselor, this will help you understand what you can and can’t afford so you can look within your price range. Getting pre-approved for a mortgage also makes you a much more attractive buyer to whoever is selling the home. This is an excellent leg-up, especially in a competitive market like we see today. Once approved, don’t spend money on furniture or other big-ticket items. The banks will monitor your activity so be sure to stay on budget. In conclusion Keep three main goals in mind as you move forward in your house-hunting journey: save up for a down payment, track your credit, and work with a professional. Doing this makes it possible to find a mortgage option that works for you despite your low credit score.