Buying With Bad Credit

If you have bad credit but still want to buy a house, you have more choices than were formerly available to people with financial problems. But the cost of getting a house may be way too high, says a real estate columnist for Scripps Howard News Service.

Consider the potential home buyer who goes to a lender and gets a $120,000 mortgage at the best rate available, currently about 7 percent. The monthly payment would be $831.

But those who have a lot of black marks on their record won't be able to get that 7 percent rate right way. They will be sloughed off into the so-called subprime lending department. If someone offers you a subprime loan, it means you will be paying more--usually a lot more--for the privilege of buying a house, says Reeves.

That $120,000 mortgage at 11 percent would require a much steeper monthly payment $1,190 and at 13 percent it would be a breathtaking $1,382.

Supposing you could afford those kinds of payments, should you do it? Probably not, if you think you can clear up your credit record in the next few years and have a decent place to live in the meantime. Why pay the lender all that interest money when you could be saving it instead for a sizable down payment?