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How To Buy a Home in Florida With Bad Credit


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If you’re overwhelmed trying to sell your home and buy a new one with a less-than-perfect credit score, we’re here to help. From how to sell your current home to the down payment and loan options available, we’ve rounded up everything you need to know about bad credit home loans in Florida.

It’s hard enough trying to sell your home and compete for a new one in Florida’s hottest real estate markets. When you’re buying a house with bad credit, there may be additional hurdles, but homeownership is still possible. Let’s go over where to start, how selling your home first may help, and more.

Selling Your Current Home Could Help You Buy a New Home With Bad Credit

If your credit is less than perfect, you may need to sell your existing home first. In certain financial situations, home buyers are able to buy a new home before their house has sold. To do this, you would need ideal credit, enough for a down payment without selling your home, and the ability to carry both mortgages until your house sells.

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If this doesn’t sound feasible, there are other options available. To start, consider selling your home to a cash buyer. During this process, you’re able to have your home evaluated and sell it for cash without needing to list it on the market.

If you list your home traditionally, you could spend weeks or even months waiting for a buyer to purchase your home. During this process, you’ll typically need to have showings, an open house, inspections, and have your home appraised. In addition, you’ll likely need to wait for your potential buyer to have their financing approved.

During all this time, you’re unable to make an offer on your new home. Your equity and finances are likely all tied to your existing home. Once your home is sold, you’ll have a good idea of what you’re able to put down and what you can afford monthly on your new home. Without selling your home, your options are more limited with a low credit score.

Setting Your Budget

Setting your budget is one of the most important steps when you’re buying a home. Your budget will help you figure out what you can afford each month and how much you’ll have for a down payment. You can start creating your budget digitally using a spreadsheet on your computer, your phone, a budgeting app, or even with a pen and paper.

To start, write out all your sources of income. Write out your income before and after taxes so you have a better idea of what’s coming in. Next, write out all your fixed expenses. Write out your current mortgage, your car loan payment, and what you pay for other debts such as credit cards and student loans. These fixed expenses are all expenses you have to pay.

Expenses that aren’t fixed come next. Things such as gym memberships and music subscriptions can go here. These are also items you can cut back on if needed. Once you have a clear picture of what money is coming in and out, you can better plan for how much you can spend on your new home.

It’s important to write down as much detail as possible here. What a lender says you can afford might be a lot different than what you’re comfortable with. You want to know your budget going into the process so that you, your lender, and your realtor are on the same page with what you can afford.

Understanding Your Credit Score and Why It’s So Low

When your credit is less than ideal, it’s helpful to take a look at it before applying for a loan. You can download a free copy of your credit report from the Federal Trade Commission once a year. You’ll want to look at any negative remarks on your credit.

If you see anything you think shouldn’t be there, you can try to dispute it with your creditor or with one of the three credit bureaus. The three credit reporting agencies are Equifax, Experian, and TransUnion. You may find something is dragging down your score that was misreported on your report.

Looking at your credit report is also helpful for seeing how much debt you have. This can help you make a plan for paying it off and reducing your debt-to-income ratio. This ratio refers to how much debt you have compared to your income.

You’ll also find how much credit you’re using in relation to your available credit. This number weighs heavily on your score because it shows how responsible you are with your credit. This is known as your credit utilization ratio. If you have a lot of available credit, it shows lenders you’re spending responsibly and not living over your means. The lower this ratio, the higher your credit score will be.

Getting Your Paperwork in Order

Before applying for a mortgage, it’s important to have your basic information handy. This will include your paystubs, tax returns, and bank account information. This information is what your lender will use to qualify you for a mortgage.

In addition to your credit score, debt-to-income ratio, and how much credit you’re using, they will also want to verify your income. With a low credit score, your income will help you qualify for a loan. Just because you have a lower credit score doesn’t mean you aren’t a high earner.

A lender looks at your income as well as your credit score to determine how risky you are as a potential client. The more information you can pull together about your income will be helpful for your qualification.

Getting a Mortgage with Little to No Down Payment

If your credit is lower, you may need a little more of a down payment to help you qualify for a mortgage. While there are mortgages available for people with a low credit score and a small down payment, the more you have saved, the better.

If you’re selling your current home first, this will be helpful when you’re applying for a new loan. You may be able to use the cash you receive from your current home to put toward your new home. If you qualify for an FHA loan, you can get a home with as little as 3.5%.

With an FHA loan, you can make your 3.5% down payment and use any remaining cash from the sale of your current home to help pay off debt and boost your credit score. The FHA loan program is designed to help buyers in difficult financial situations afford a home.

Repairing Your Credit Quickly

Before you start applying for a loan with a low credit score, you may want to try to bump it up. There are a few easy ways to do this in a short timeframe. While bringing your score from poor to excellent could take years, small changes can boost your score little by little each month.

To start, use as much of your disposable income as possible to pay down your credit card debt. Make sure to pay all your bills on time each month. Any expenses you aren’t using should be canceled.

You may be surprised by how much money you can save by making some small cuts. Maybe you have a gym membership you don’t use or multiple streaming channels you aren’t watching. This money will add up quickly and can all go towards reducing your debt.

If possible, you can also sell your home and live somewhere else for a short time period to save money. Maybe you’re able to rent an apartment for a lot less than your current mortgage. A year in this apartment could help while you save money and boost your score before buying again.

Applying for Bad Credit Home Loans in Florida

Before applying for credit home loans in Florida, you’ll want to see how much your current home is worth as soon as possible. Having some assets in the bank from your previous home can help your chances of qualifying for a home. It can also help you reduce your debt, save for a down payment, and boost your credit score.

It’s important to know that even with a low credit score, there are home buying programs and options for you. If you’re ready to kick off the process of selling your home, fill out submit your address here and get no-obligation offers. We’ll help connect you with cash buyers to get you one step closer to your new home, regardless of your credit score.

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