Your credit score matters to mortgage lenders, but that doesn’t mean it’s impossible to buy a house with bad credit. In addition to other loan options, there are other strategies for buying a home if your credit report is less than ideal.
Here are some of the ways you can work toward buying a house with bad credit:
Government subsidized loans
As an alternative to a conventional loan, the U.S. government offers various loan options for qualified borrowers wanting to buy a home. The three most recommended are FHA loans, USDA loans and VA loans.
- FHA loans are offered by the Federal Housing Administration. An FHA loan is great for first-time homebuyers because of lower minimum credit score requirements and lower down payments.
- USDA loans are paid for by the U.S. Department of Agriculture. This type of loan can help you buy a house or property in a qualified rural area.
- VA loans are available from the Department of Veterans Affairs for active military personnel and veterans. These loans typically have a special one-time funding fee instead of a large down payment.
Private loans
Private loans are arranged between the borrower and a private individual lender rather than a mortgage company. Private mortgages typically exist between family members, friends or other personal connections. However, it’s not impossible to find a private mortgage lender on your own.
These types of loans can be much more forgiving when it comes to credit report, but might have other requirements per the individual lender.
Cash
While not always likely, it is possible to buy a house with cash rather than borrow money at all. Otherwise, another strategy for homebuyers with low credit scores is to supplement a mortgage with a cash payment.
For example, if a lender offers you a mortgage with a higher interest rate or higher down payment because of your credit, you can use cash to lighten the financial burden.
These options won’t work for every buyer, but they’re worth considering if you want to buy a house with a low credit score. Keep these strategies in mind when evaluating your financial situation and shopping for a loan.
About the Author
Julia Brown and Barry Weiss Weiss
Introducing the partnership of Brown & Weiss. Julia & Barry have a combined 23 years of experience in real estate and over 70 combined years of customer service. They each have lived in the Wilmington area for over 20 years and are very familiar with the local market. Their savvy negotiations and cutting edge marketing join uncompromising integrity as the hallmarks of Julia and Barry’s service. They are well respected in the Wilmington area not only for their professional track record and high ethical standards, but for being hardworking individuals that will do anything in their power to ensure their client’s success. Julia and Barry enjoy working for the number one real estate company in the area- Coldwell Banker Sea Coast Advantage. With the Coldwell Banker brand and their experience behind the sale or purchase or your home, you can’t go wrong. So, put us to work for you today and “Let us light your way home".
