Having a bad credit history does not mean you cannot buy a home, but the stark reality is that you probably will have to pay more than a borrower who has excellent credit. Although the legal period between bankruptcy filings is seven years, your credit report can be adversely affected for an entire decade. The key to realizing this elusive American dream is to spend a good deal of time researching all the various options you may end up encountering.
There are two types of loans available: a bad credit secured loan and a bad credit unsecured loan. A secured loan is highly unlikely since assets are not available and thus it will probably be a bad credit unsecured loan. These loans are not easy to get, as banks are understandably leery of people with bad credit. You may still be able to get one, but it will be based on you ability to repay (your income level).
Consider a Lease Option. This type of agreement is made with a property owner in which you are allowed to live in the home as if you are actually the owner. Usually the signed agreement is for a year or two and as soon as you qualify for a home loan within the agreed time period, you buy the house at the originally negotiated price. Technically, you are leasing the home with an option to buy it, which is a good deal because it gives you time to repair damaged credit.
There are other benefits associated with a lease option. For one thing, you don't have to deal with a landlord, and you can renovate the home, as you desire. Also, as the home appreciates in value, the increased equity becomes yours since you are bound to buy the house for the original negotiated price. In a way, you are locking in the market price of the future today.
Credit cards are the best way to build credit, but be careful with them. Make payments promptly every month; it will not go unnoticed. If your credit is so bad that you can't get a card, you can apply for a secured credit card at a bank. This entails putting a deposit on the card, which becomes the card's credit limit, which is $500 or $1,000 dollars. After about a year of good use, this card becomes a normal credit card and you are refunded your deposit.
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