Win With a Low Score: How to Buy a House if You Have Bad Credit
Finding the perfect home with good credit is hard enough, but when your credit is less than ideal, being approved for a home loan can seem impossible. Even if you have a down payment, it can be tough finding a lender who will give you a mortgage.
However, this doesn’t mean that that you can’t buy a home. If you have a low credit score and still want to buy a home, here are four options you should consider.
Correct Your Credit Score
Knowing your credit score is essential, especially if you’re trying to buy a house.
If this is your first time finding out your score, there are a few places you can check it for free.
Home mortgage companies will check your credit, so you need to know what’s on your report before applying.
If you find errors, which happens all the time, you can contact the credit reporting agency and have it removed.
Down Payment
If you’re willing and able to put down a larger down payment, lenders will be more will to take the risk of giving you a loan.
It’s pretty standard these days for people to get a home mortgage by putting down at least three percent of the total purchase price.
However, for people that have less than ideal credit, putting down a larger than usual down payment dictates whether or not you get approved.
Apply for an FHA Loan
FHA loans, which are a home loan that is backed up by the Federal Housing Administration, generally have reasonable requirements in regards to credit.
People can qualify for an FHA mortgage by putting down 3.5 percent of the final purchase price of the house.
However, keep in mind that you must have a credit score of at least 580 to do so.
State-Based Programs
In addition to FHA loans, you may qualify for a state-based program, which makes buying a home possible for people with limited income and low credit scores.
In New York State, people looking to buy their first home can apply for the SONYMA program.
While they do not have credit score requirements, other factors determine eligibility.
To find out if your state offers this type of program, it’s best to check with an experienced real estate agent or lender.
Even if your credit is low, it’s possible to buy a home. To get things moving in the right direction, check out your credit report, calculate how much home loan you can afford, and work with someone who has experience working with people with lower credit scores.
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Category: Housing
