Today, those with damaged credit have more opportunities to borrow to buy a house than they have had in the past. There are many lenders that specialize in what is often referred to as a bad credit home purchase loan. However, as with many things in life, just because you can, doesn't mean you should. Indeed, loan availability could be considered a small part of the decision of whether or not you should purchase a home at this time.
What You Can Do
To help you in deciding whether or not you should purchase a home, the first step should be to run the numbers to find out what type of mortgage rates you may be eligible for and how much it would cost you to buy now. It's better to do this before speaking with any lender offering bad credit purchase loans.
The first number you'll explore is your credit rating, using information from one or more of the major credit reporting agencies. Among the best known is Trans Union, Equifax, and Experian. Then, you'll need to consider the loan-to-value ratio, or the relationship between how much you want to borrow and the worth of the house. Your debt-to-income ratio, or how much your total debts are in comparison with your current income, is another factor that will influence the type and rate of loan that is available to you.
What You Should Do
You can use the numbers you collected above to determine what terms and rates may generally apply to your financial situation and, with the help of a mortgage calculator, make an estimate of what a loan for a given amount will cost you monthly. There are a variety of other factors, such as points and closing costs that will affect that number, but for initial decision making as to whether or not you should purchase a home at this point in time, it is useful.
There are many lenders willing to offer you a loan, even if your monthly mortgage payment surpasses the 30% of your income that is typically recommended. That does not make it a good idea. There are other expenses involved in home ownership that you'll need to factor in, such as repairs and maintenance. Buying too soon could place an undue and unnecessary financial on your shoulders.
Consider and compare the advantages to waiting. You'll have time to shop for the best bad credit home purchase loan possible. You'll be able to save for a bigger down payment and continue to improve your credit rating. All of these actions may translate into better rates and terms, which will allow you to pay less in the end.
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