Buying a Home with Bad Credit

Bad credit happens. The question is: How do we fix it?

There are a myriad of ads you see if you Google “Credit Repair,” all offering a quick fix to your credit issues if you would only pay them a low, low amount. However, there are no quick fixes, and there are no shortcuts.

There is, however, a simple and straight-forward approach you can take to put yourself in a better position, raise your credit score, and be able to purchase a home, within a reasonable amount of time, usually 6 months.

The first place you want to start is getting a copy of your credit report and credit score. CreditKarma.com offers this for free. If your score is at a 580 or above, you can get approved for a mortgage is certain circumstances through certain lenders.

If your score falls short of that, it is time to get to work. This means paying off collections, and starting to build positive credit history, which can be done simultaneously.

Your credit report will list all accounts that impact your credit. You will probably notice that the same collection company is servicing multiple collection accounts under your name. You can actually negotiate a settlement for all accounts under that company. The key is to have the cash in hand to pay them, and to get a statement from the collection agency stating that if you pay $X, they will consider accounts X, Y, and Z paid in full, and will report that to all credit bureaus.

Building positive credit is also important. Most lenders will want to see 3 active credit accounts in good standing, for about 6 months. The simplest way to do this is by:

·         Getting 2 secured credit cards from your bank or credit union. Basically, you will deposit a certain amount with the bank, and they will give you a credit card with a credit limit of the amount that you deposited. The more you are able to put down on the card, the better, as higher credit limits are looked more favorably upon. Whatever your credit limit is, do not let your balance on that card exceed 30% of the credit limit. Also, be sure to make payments on time every month.

·         Get a Credit Builder CD from BMO Harris. This is a fantastic product. Basically, you are purchasing a Certificate of Deposit (similar to a savings account) on credit. You pay them $45/month for 2 years, and at the end you have a $1000 CD that you can cash in. You can print off the application and information for this here: https://drive.google.com/file/d/0BxiPFes1j58PMF9rZm5LQ09VYjQ/edit?usp=sharing

Avery Garrett is a top Indianapolis Realtor serving the Indianapolis Metropolitan area from Coldwell Banker Kaiser. Avery is Zillow.com Premium 5 Star Agent and Top Contributor, and is a Member of the Metroplitan Indianapolis Board of Realtors. Contact Avery for a complimentary, no obligation, Market Analysis of your home at 317-721-2274, or SoldByAvery@gmail.com. See Avery's reviews and search for a home at www.SoldByAvery.net. 

Avery is proud to help home sellers and home buyers in the following communities: Carmel, Fishers, Noblesville, Westfield, Cicero, Sheridan, Lebanon, Zionsville, Brownsburg, Avon, Danville, Plainfield, Mooresville, Camby, Greenwood, Bargersville, Martinsville, Franklin, Shelbyville, Southport, Beech Grove, New Palestine, Greenfield, Lawrence, Greensburg, Nashville and beyond.

First Time Home Buyers - Where to Start

Buying your first home is a major, life changing decision that will impact the immediate and long term future of yourself, your spouse, and your current or future family. When contemplating buying your first home, there are many factors to consider, and what seems to be an endless list of things that need done. So, where do you start?

First, you want to be sure you are in a good position to purchase a home, personally. Are your finances in order? Is your job steady? Are you disciplined to make the payments on time every month? Do you have savings in case something happens to the house that you need to fix?

Second, you need to decide what area is the best for you in the mid-term, and possible long term. Is the area on the rise, or is it declining? Are employers coming in, or are they leaving? What about the schools? Is it conducive to your lifestyle? You want to be satisfied with the location, keeping in mind that in 7-10 years you will probably be in a better position, and be looking for another home, your "forever" home. (Ever heard of the 7 year itch?) A good Realtor can help you determine the pro's and con's of different areas.

The next thing you want to do is to find a good Realtor who knows the market and is available. Don't just go with one that you know through so and so. Find one that is reputable, and has positive reviews. A good Realtor will be able to help you determine the best area for your situation. A good Realtor will also be able to help you figure out which program will work best for you. There are a slew of options, FHA, USDA, Conventional, VA, Insured conventional. A Realtor knowswhat would work best for you.

A good Realtor will also advise you to get pre-approved by a mortgage broker they have formed a relationship with. A mortgage broker will review your credit and income, and let you know how much you will be approved for. It makes no sense to look at homes you can't afford, in fact, it is down right mean! It is almost always better to get with a local mortgage broker, then it is to go through a big bank. You also want to make sure you are comfortable with the payments that go along with the amount you are approved for, and have your Realtor reduce the price of the home to the maximum payment you would feel comfortable with.

Once you have an approved and agreed upon maximum budget, it is time to start looking at homes! Most Realtors will set you up with an automated email search through their local MLS/BLC. (Realtor system) This will send you an initial list of every home that meets your criteria within your price range, and will update you with any new listings or price reductions the first day they hit the market. From there, you and your Realtor will come up with a list of homes you want to see, schedule the showings, and see which one you like the best. The key in searching is to be flexible, and ready to pounce when you see a home you may be interested in. Keep in mind, that other people are getting the same emails you are, and will probably like the same home you do. It is first come- first served.

Once you choose a home you want to purchase, it is time to put the offer in. A good Realtor will know the market condition of the area, and advise you on what he thinks the offer should be. Sometimes you go higher than list price if you really want the home. If you are asking the Seller to pay closing costs, sometimes you offer a higher amount, to include the closing costs in the price. It all depends on your situation, how much you like the house, and the market conditions for that neighborhood or area. There is no rule of thumb, it is a case by case basis.

After you put an offer in the Seller either accepts it, counters, or rejects it. If they accept, great! If they counter, you can counter back, accept, or reject.

Once you have an accepted offer, you order the inspection of the home. An inspection will detail every possible and minute flaw the home has. It is important to be reasonable during the inspection process. Here, buyers' remorse sets in. Oftentimes, I've seen this as the reality check of buying a home, and the process loses its magic. Don't fret. A good Realtor can advise you on what to ask the Seller to repair before closing. Every home is going to have something wrong with it, the important thing is weighing the pros against the cons, and determining the costs of fixing it, and being reasonable.

At closing, you sign a bunch of paperwork, cut the check, get the keys, and become home-owners!

If you are interested in buying a home now, or in the future, reach out to me. The best part of my job is to watch people's dream of owning a home come true.

Avery Garrett is a top Indianapolis Realtor serving the Indianapolis Metropolitan area from Coldwell Banker Kaiser. Avery is Zillow.com Premium 5 Star Agent and Top Contributor, and is a Member of the Metroplitan Indianapolis Board of Realtors. Contact Avery for a complimentary, no obligation, Market Analysis of your home at 317-721-2274, or SoldByAvery@gmail.com. See Avery's reviews and search for a home at www.SoldByAvery.net. 

Avery is proud to help home sellers and home buyers in the following communities: Carmel, Fishers, Noblesville, Westfield, Cicero, Sheridan, Lebanon, Zionsville, Brownsburg, Avon, Danville, Plainfield, Mooresville, Camby, Greenwood, Bargersville, Martinsville, Franklin, Shelbyville, Southport, Beech Grove, New Palestine, Greenfield, Lawrence, Greensburg, Nashville and beyond.