How to Buy a House with a Poor Credit History

Home ownership is a dream that millions of Americans have. But in order to make that dream a reality, you’ll have to invest a lot of time, energy, and money. For many, it can seem impossible to own a home due to poor credit. But it doesn’t have to be that way.

While it’s true that the stronger your credit score is, the better off your chances of buying a home will be, buying a house with poor credit scores isn’t impossible to do. For many – especially first time home buyers – there are options and several steps that you can take which will help you get a home loan and get into the home you’re looking at.

The first thing you have to do is accept reality. Buying a house with poor credit scores means that you’re going to end up with higher interest rates, probably need a larger down payment, and could have some other terms that aren’t quite what they would be if your credit was higher. This is why many people simply say that they can’t buy a home due to their credit. They can – but the terms aren’t what they have in mind. Once you accept the fact that you’ll pay higher rates due to your low credit, you’re ready to start investigating your options a little further.

When you begin the hunt for your home loan, you need to take a look specifically at home owner loans for people with low credit scores. The best place to start is with government organizations and agencies that work with lenders. If you don’t qualify for these, then it’s time to look at subprime lenders. Here’s a look at a few of the more commonly used government backed home loans.

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  • FHA – These loans are backed by the FHA, and as a result lenders are able to offer better terms. They’re available to those with bad credit, and actually require much less of a down payment than traditional loans and subprime mortgages. In general, this is the best option if you have bad credit and need a loan.
  • VA – VA loans offer even better terms than FHA loans in many cases, and can be obtained with low credit scores as well. However, you must be a military member or veteran in order to qualify. If you are a vet, these are well worth thinking about. If you’re not, you may need to look elsewhere.
  • USDA – In some instances, USDA backed loans are available. They’re generally available only in rural areas, and some other stipulations must be met, but could be the answer you’re looking for.

If you don’t qualify for any of the above options, or if you’d rather not take out a government backed loan, you still may be able to secure one through a subprime lender. You’ll need to look into what kind of terms are being offered and pay attention to the mortgage rates, but you do have options. Buying a home isn’t’ impossible with poor credit – you just have to know what path to take.

 

 

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