Bad Credit Home Financing - When Should You Buy a Home?

The best time to buy a home is when it meets your budget and home goals. Buying a home is as much an emotional choice as a financial one, so no one can say when the absolute best time is to purchase your home. Before making the decision, look at what you want and then act on it.

What Are Your Budget Goals?

Bad credit isn’t an obstacle to financing a home. Sub prime lenders offer reasonable rates even to people with credit scores in the 500s. Add a down payment of 20% or more, and you will have an even better home loan. Mortgage interest can be itemized on your tax returns, another added bonus.

However, there are other budget concerns. Homeownership has its expenses, such as taxes and insurance. You want to consider this when deciding on how large a house payment you want to take on.

What Are Your Home Goals?

If you plan to stay in the same home for more than a couple of years, then buying a home makes sense. With enough time, you can see an appreciation in your home’s value and a build up of your equity.

However, if you plan to move in less than two years, you could be needlessly lose money on closing costs. You may well see your property value go up, but real estate is notorious for being unpredictable.

What Is Your Credit Score Outlook?

Credit scores are fluid, changing every time you pay a bill or make a purchase with a credit card. As a rule of thumb, you can go from poor to good credit in two years. So a change of 100 points translates into savings of thousands of dollars.

You could purchase your home now, and then refinance when your credit score improves. But you will have to pay closing costs, which usually adds up to at least 2% of your loan’s balance.

The other option is to wait until you qualify for conventional rates with a good credit score. But rates might increase to where sub prime rates are now.

If you are still questioning yourself about purchasing a home, take a look at loan rates. You can get free quotes without hurting your credit. Add up the numbers and see what works best for you.