Can I Sell My House With Bad Credit?
Trying to sell a house with bad credit can feel stressful and uneasy. You’re already dealing with financial turbulence in your life. Tacking on another project – like trying to sell your home – may become overwhelming.
But is it possible to sell a house with bad credit? The short answer is, yes! Credit affects many things in real estate. However, it is more often on the buyer’s side of the transaction. Homeowners can sell a property with bad credit as long as they find the right homebuyer to purchase it.
Keep reading to learn the ins and outs of selling a house with bad credit and the answer to the question, “Can I sell my house with bad credit?”.
Can I Sell My House With Bad Credit & Buy a New One?
While you can sell a house with bad credit, if you are trying to sell your house with bad credit and buy a new one, you may run into a snag. Banks run your credit during the underwriting process before allowing you to borrow a mortgage loan from them.
Checking on your credit is a standard part of the home-buying process when using a lender. If your credit doesn’t meet a certain standard set by that particular bank, they have full right to deny your mortgage application.
You can still buy a home with poor credit after you sell your current one, however, using a mortgage may not be possible. This all depends on how bad your credit is. Buying a house using cash is always an option. Using this strategy, you don’t have to rely on a real estate lender to approve your loan because there is none!
If you have enough cash on hand, you can sell your house with bad credit and purchase a new one “free and clear”. This means you don’t have a mortgage tied to the property and you own it outright. Paying with cash is one strategy that enables homeowners to sell a house with bad credit and buy a new one.
Can I Sell a House With Other Liens?
Bad credit doesn’t necessarily mean you cannot sell your home. However, if you have other liens tied to your property, that could deter you from selling it. Typically, sellers pay for the liens at closing using the proceeds from the sale.
This is not a hard rule and can differ per transaction. But, it’s important to know that, as a homeowner, you are likely responsible to pay off your liens when you sell your property.
It’s possible to sell your house with bad credit when you have other liens tied to the property if there’s enough profit to cover the outstanding debts. You can also pay off the liens with your savings, but who wants to do that?
If you sell your house with poor credit and the HUD (U.S. Department of Housing and Urban Development) shows that you’ll make quite a bit of money, then you should be able to pay off your other liens.
The HUD, also known as the settlement sheet, discloses and outlines your entire net profit from selling your property. After reviewing this real estate document, you’ll know right away how many liens need to be paid off at closing and what amount of money you will pocket from the sale of your home.
How to Improve Bad Credit Before Selling
If you need to sell your house with bad credit and buy a new one, a long-term solution is to improve your credit. “Easier said than done”, said everyone. Improving bad credit won’t happen overnight. But if you look long-term, it can help you achieve your real estate and financial goals in the future.
Here are several quick wins that you can implement to start improving your credit.
- Pay off as many debts as possible – including credit cards
- Become current on all payments
- Pay off your mortgage early
- Consistently pay your bills each month
- Increase your line of credit on a credit card and pay it off consistently
There are countless ways that you can improve your credit. These are just a few examples to get you started. For those that need to sell a house with bad credit, consider these tips to help you improve your financial positioning.
Provided you don’t need to sell a house quickly, you can begin improving your credit slowly with these tips. Eventually, you can improve your credit and not have to worry about this issue anymore. If you do need to sell fast, consider selling to an investor for cash.
Summary: Selling a House With Bad Credit
You can sell your house with bad credit using these different strategies. Credit, although cumbersome, is not permanent. There are always opportunities to improve your credit or work around it when selling your home.
Buying a property is more challenging with bad credit unless you have substantial cash to put down in the transaction. Either way, move forward with confidence when approaching your next real estate situation.
For those that need to sell a house fast in Philadelphia, our expert team of real estate agents at Brotherly Love Real Estate can help. We buy houses fast for cash – even if you have bad credit. Contact us to find out more and get your cash offer.