Author: Digital Dan

One of the many goals of life for most people is to live with increased ease, more permanent joy, decreased stress, and a higher level of happiness. A home would that for you. Owning a home is a little more than the hype it carries. Once you own a home, you can start preparing for long-term and short-term financial success.

However, it is not that often that people have the full payment for the house. Hence, most people rely on lenders, be they banks, mortgages from work, or other lenders, to help them buy their first home.

But, what do you do if you have a low credit score? Here is how you can hack first-time home loans for people with bad credit.

First-time home loans for people with bad credit

If you are applying for a mortgage for your new home, you have probably gone through all possible financing options. You may even be trying to get a home loan. Organizations have different qualifying requirements, but a good credit score is always a plus point.

So, first-time home loans for people with bad credit are not always the easiest to negotiate. Conventionally, you need to have a credit score of 620 or higher. Otherwise, you may not qualify for a loan from your lenders, and if you do, you end up with crazy high-interest rates, which translate to higher monthly payments.

However, if you want a loan to buy your home with a poor credit score, there is a way out.

Steps to getting a home loan

Getting a home loan is an engaging experience. There are many choices to make and a lot more factors to consider. More importantly, you need to prove your capability to pay for the loan, which includes calculating an installment you should pay monthly.

Other than that, you can break down the home loan process into about 6 major steps:

1. Pre-approval
   
   Going through a pre-approval process is the first step in home loan applications. Here, the lender will issue a document stating the maximum amount they can loan you for your home.
   
   The lenders can process the pre-approval documents fast. They run a three-bureaus credit report, which shows your credit score, as reported by 3rd party lenders, before approving an amount.
   
   The pre-approval helps paint a clear picture of the budget you will be using while house shopping. Most importantly, you need to understand the types of mortgages before settling on the one that suits you.
   
2. House shopping
   
   Find a property that now matches your budget and suits your needs. You can use real estate portals, buy a house off the market or buy it at an auction. Remember to avoid some common mistakes when house shopping.
   
   Some of these include:
   Downplaying flaws in a house that could easily make your stay hell Waiting too long before making an offer or making one too soon Overbidding in fear of losing out
   Keeping houses you cannot afford on the list
   Hunting for a house without the pre-approval from the lenders
   Not looking around for long enough or compromising on essentials
   
3. Mortgage application
   
   Once you have a house in mind and a budget to work with, you can apply for a mortgage from your lender. During your application, you may need: Proof of employment
   Proof of income
   A list of assets
   A list of debts
   The details of the property you want to buy
   Credit history from 3rd-party bureaus
   
4. Loan processing
   
   During the loan processing stage, the lenders gather the information to estimate how much money they can lend. You then receive a loan estimate, which you can use to compare offers from different lenders.
   
5. Underwriting
   
   The next stage involves underwriters checking every aspect of your application and deciding whether to lend you their money or not.
   
6. Closing
   
   You are invited to visit the lender’s or attorney’s offices for the closing meeting upon successful application. Here, you will see a closing disclosure form, which breaks down any increase in closing costs.
   
   What affects your credit score?
   
   The credit score ranges from 300, the lowest, to 850, the highest. Different factors contribute to your credit score.
   
   Some of these include:
   
   Payment history- If you pay your debts on time, you will have a high credit score.
   
   The amount owed- Your credit utilization ratio is another important factor. It looks into your current credit and credit limits, which helps lenders paint a better picture of your reliability on non-cash funds.
   
   Credit history length- how old is your credit account? How young is your latest credit account? A longer credit history improves your credit score.
   Credit mix- A diverse portfolio of credit raises your credit score New credit- Too many credit accounts increase risks, thus negatively affecting your credit score.

Other options to get a home loan with a low credit score
If you have a bad credit score and are looking for alternatives to buying a home, there are a few options to try. Some of these include:

Reaching out to your lender- some lenders focus on forming relations, so your current loan servicer may come in handy

Consider an FHA streamline refinance

Apply for a VA refinance option, where you enjoy a hassle-free interest rate reduction refinance loan

Use the USDA assist program

Consider a portfolio refinance loan

Factors that affect your home loan approval
Even as you apply for a home loan, your credit score is not all lenders consider when issuing a home loan. Other factors that may affect your home loan application for the first time include:

Your age- your age speaks volumes about your ability to pay back within a certain time


Qualifications and experience- impressive work and academic credentials better your chances of getting a loan


Your income- a higher income increases your chances of successful home loan approval compared to a low income


Dependents- the more dependents, the lower the chances of you getting a loan


Type of employment- permanent employment is better than contractual jobs in home loans. Frequent job changes can shift your chances either way.


Down payment- lenders only lend 80% of property value


Market lending rates- interest will dictate the cost of your loan

Potential lenders to try if you have poor credit
The credit score you need to buy your home will depend on the type of loan you want. Luckily, government-backed loan programs help even people with low credit scores access loans to buy homes.
Some of these organizations include:
Index
Organization
Minimum credit score
Min Deposit

        New American Funding
        580
        0%

        Watermark Home Loans
        580
        3.5%

        Northpointe
        600
        3.5%

        Carrington
        500
        3.5%

        Homebridge
        550
        3.5%
    Having bad credit can ruin your first-time home loan. However, this does not have to be the case. You can explore different options and own a home. Go out, talk to your lenders and see what home you can afford to buy.

Credit cards are very dependable and are mainly used across all purchases worldwide. Credit cards are highly preferred as they are handy, easily manageable, secure, and have no fundamental value. Over the years, credit card application and issuance criteria have changed to suit everyone who needs one.

Credit cards come in two options: secured and unsecured credit cards. One might be better than the other, depending on your financial situation. If you have or once had a bad credit history, you understand how hard it can be to qualify for a credit card. If you are looking for solutions, here are a few insights on unsecured credit cards for people with poor credit scores.

Secured vs. unsecured credit cards: What are the differences?

The secured and the unsecured credit cards present some differences in their use, as shown below:

Secured credit cards necessitate a cash deposit to act as collateral in case of payment defaults, while the unsecured credit card requires no collateral. Unsecured credit cards give a specific amount of credit that allows you to purchase items and make payments to stay below your listed limit.

The spending limit of secured credit cards is dependable on the size of the deposit, while that of an unsecured credit card depends on the credit profile and income of the user.

Secured credit cards have low-risk afflictions to the user, while the unsecured have a high risk to the user.

Secured credit cards are low-fee cards available to most credit types, while the unsecured card type is mainly associated with excellent and fair credit scores.

How to obtain an unsecured credit card with a poor credit score

A credit score below 500 can stop you from getting financial assistance in many cases. You may face difficulties when applying for a home loan or even a credit card, but that should not be the case.

There are ways to obtain an unsecured credit card for people with bad credit. Here is how you can do it too:

The creditor will ask for your personal information, including your annual income. If your creditor still approves of your application with low credit, they can issue a card.

Alternatively, you can get an unsecured credit card with low credit if you become an authorized user on another person’s account.

If you still do not qualify for an unsecured credit card with a low score, you can work toward improving your credit score.

Unsecured credit companies for people with bad credit

If you have a low credit score and no cash to put down as a deposit for your credit card, you can go for an unsecured card. Some credit companies are open to bad credit and unsecured credit cards. These include:

Capital One Platinum

Mission Lane Credit Card

Discover It

Petal Credit

Capital One Quicksilver Card

Revvi

Total Visa

Conclusion
Credit cards are slowly becoming part of our lives and businesses. Having a credit card that suits your current need is a big financial step. A low credit score may complicate your loan and credit applications, but it is not a limiting factor in obtaining a credit card. Find an institution that accepts your low credit score and build towards a better credit score using the unsecured credit card.