The biggest barrier to purchasing a home many times is not necessarily money, it is your credit. Poor credit scores can be overcome, but often it is at a high price as you will not qualify for the best terms on your loan. When your score drops before a specific number, banks and lending institutions consider you a high risk and will charge you higher interest rates and sometimes a larger down payment. Knowing your score is vitally important when you want to purchase a home and understanding how to improve a low score.

Check Your Report

It can never be stressed enough how important it is for you to check your credit report at least annually. The United States Federal Government allows one free credit report yearly from the three major credit report agencies. Visit the Federal Trade Commission (FTC) website to receive your free annual credit report from the government’s authorized agency: Annual Credit Report.com. There is no need to pay for this annual report since The Fair Credit Reporting Act guarantees that all citizens have the right to know and review their credit report on an annual basis. Agencies and Credit Repair

There are three major credit reporting agencies Experian, Tran Union and Equifax. You will want to request a report from all three of them as they may have varying information. Once you have received your report you should go through it with a fine tooth comb. Examine it closely for any errors, yes these companies can get it wrong! If you spot an error, report it to the agency with any documented proof that you have paid the outstanding balance or do not owe it in the first place.

After you have dealt with all the discrepancies on your report there is a good chance you are still not ready to apply for a first time home buyers loan. Look at your credit report and when you find old accounts that are not due to come off anytime soon, you should work toward paying them off. This is the quickest way to get your score back on track and you closer to your dream house.

Down Payment

The days of zero down and creative financing are pretty much history. After the housing bubble, burst financial institutions went back to demanding ten percent down for anyone wishing to purchase a home. Add to that the fact that many people now owe more for their home than it is worth and you have a severe problem when it comes to financing. Your best bet is to save as much as you can toward the down payment, even with bad credit you can sometimes get in the door with a good down.

Conclusion

Can you still get a first time home buyer loan with less than perfect credit? The answer is yes, but you will likely pay for your score. Increased interest rates can add up to a couple of hundred dollars on your payments, money that you surely have better uses for. Work on your credit by paying bills on time, not to over extend your debt to income ratio, working with a monthly budget and a decent down payment before you go out applying for loans. In the end you and your wallet will be better off for the time, you spent.