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Home Shopping With Bad Credit: Buy or Rent?
Author David Schneider | Nov 14,2007
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The option to buy or rent your next home is an important decision. No matter what your credit history, your decision has the potential to save you a considerable amount of money. If you have bad credit, deciding whether to buy or rent a house is particularly important. To ensure you make the right choice for your unique needs, there are many factors to take into consideration.
Can You Get Approved for a Mortgage Loan?
You likely can’t afford to purchase a home without a mortgage loan. If you have bad credit, this will affect your ability to acquire loan approval. Mortgage lenders use your credit history to determine how likely you are to make your payments on time. Obviously, they would like to receive their money in a timely manner. Bad credit indicates that you pose a higher risk of defaulting on your loan, and may affect your ability to acquire a mortgage loan.
However, no matter how bad your credit, there are almost always loan options available to you. Even individuals who recently filed for bankruptcy can find loan approval if they know where to look. However, these loans will inevitably require increased interest rates and monthly payments. Therefore, the real question that needs to be asked is whether it’s more cost effective to buy or rent your home.
Is it Cheaper to Buy or Rent?
To answer this question, it’s a good idea to gain pre-approval on a home mortgage loan. Ask for loan quotes from a variety of lenders to see what prices are available to you. If you are having trouble gaining approval with standard loan companies, then consider contacting sub-prime lenders. Sub-prime lenders are companies that cater to homebuyers with bad credit. They are more likely to approve you for a loan, but will require a higher interest rate.
Find out what size loan and what interest rates are available to you. Compare the monthly cost of such a loan with the monthly amount it would cost you to rent a comparable home. If the monthly cost of purchasing your home is higher than renting, then you may want to consider being a tenant for a while.
Renting Allows You to Rebuild Credit
If your bad credit is keeping you from acquiring a satisfactory loan, then the best option for you is to work on rebuilding your credit before buying a house. Oftentimes, it can take as little as a year or two to build your credit back up to a level that yields substantially better loan options.
To improve your credit score quickly, you can take many steps. One of the most important is to pay your bills on time. Renting in the short term can give you the added monthly income to do this. A cheaper rental fee can also free up funds to pay off credit card balances. As your credit card debt decreases, your credit score will increase. Finally, another tip for improving your credit score is to hold off opening new credit accounts until after you have applied for you loan. This is because opening new accounts decreases your credit score in the short term.
The option to buy or rent your next home is an important decision. No matter what your credit history, your decision has the potential to save you a considerable amount of money. If you have bad credit, deciding whether to buy or rent a house is particularly important. To ensure you make the right choice for your unique needs, there are many factors to take into consideration.
Can You Get Approved for a Mortgage Loan?
You likely can’t afford to purchase a home without a mortgage loan. If you have bad credit, this will affect your ability to acquire loan approval. Mortgage lenders use your credit history to determine how likely you are to make your payments on time. Obviously, they would like to receive their money in a timely manner. Bad credit indicates that you pose a higher risk of defaulting on your loan, and may affect your ability to acquire a mortgage loan.
However, no matter how bad your credit, there are almost always loan options available to you. Even individuals who recently filed for bankruptcy can find loan approval if they know where to look. However, these loans will inevitably require increased interest rates and monthly payments. Therefore, the real question that needs to be asked is whether it’s more cost effective to buy or rent your home.
Is it Cheaper to Buy or Rent?
To answer this question, it’s a good idea to gain pre-approval on a home mortgage loan. Ask for loan quotes from a variety of lenders to see what prices are available to you. If you are having trouble gaining approval with standard loan companies, then consider contacting sub-prime lenders. Sub-prime lenders are companies that cater to homebuyers with bad credit. They are more likely to approve you for a loan, but will require a higher interest rate.
Find out what size loan and what interest rates are available to you. Compare the monthly cost of such a loan with the monthly amount it would cost you to rent a comparable home. If the monthly cost of purchasing your home is higher than renting, then you may want to consider being a tenant for a while.
Renting Allows You to Rebuild Credit
If your bad credit is keeping you from acquiring a satisfactory loan, then the best option for you is to work on rebuilding your credit before buying a house. Oftentimes, it can take as little as a year or two to build your credit back up to a level that yields substantially better loan options.
To improve your credit score quickly, you can take many steps. One of the most important is to pay your bills on time. Renting in the short term can give you the added monthly income to do this. A cheaper rental fee can also free up funds to pay off credit card balances. As your credit card debt decreases, your credit score will increase. Finally, another tip for improving your credit score is to hold off opening new credit accounts until after you have applied for you loan. This is because opening new accounts decreases your credit score in the short term. |
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