5 Ways to Buy a House With Bad Credit – Our Guide

house across the street

Having a bad credit score can get in the way of pursuing personal milestones, like taking a loan for your first car or even for a house. After all, it can be difficult to convince lenders that you’re going to pay your loans punctually when your credit score may suggest otherwise.

If you’re concerned that your credit score is too low for a mortgage, worry not. Your credit might not be as bad as you think, especially when you realize that there is no minimum credit score required by lenders when you start searching for a new house. If you’re looking for a house for the first time, you can avail of programs that were specially designed to help you qualify for a loan.

Here’s how to get started:

Get Ahold of Your Credit Report

The first step to improving your credit score while buying a house is to review your credit report. This will tell you what you need to know about what’s affecting your credit score, like your payment history. This can help you identify discrepancies that might have sunk your score so you can report or settle them and pay any other debts. This will definitely help boost your score.

Seek the Advice of a Housing Counselor

Consulting a professional in the field, like a housing counselor from an agency that is Housing and Urban Development-approved, can help you get on the right track of buying a home. They’ll walk you through the process of purchasing a house, the lending options you can use, and how to close a deal on a house. They’ll also explain how your credit score affects the entire procedure so you get a better understanding of the role it plays in home-buying.

Save for the Down Payment

Now that you know how much it costs to buy a house and the loans you’ll have to pay, it’s time to start saving—a lot. You’ll have an easier time dealing with lenders if you put down a larger down payment because this can get you a better mortgage rate. It also shows lenders that you’re serious about buying a house and paying it off on time.

Create Your Budget

There are other costs to consider when buying a house, so it’s important to create your housing budget and review it accordingly. You’ll have to think about paying for taxes, home insurance, and maintenance costs aside from your mortgage. You’ll need to understand how much you can feasibly spend without landing yourself into more debt.

If you need more help in determining where you can reduce expenses in order to fund your new home, your housing counselor can offer more guidance and insight into the process.

Apply for a Federal Housing Loan

It’s possible to buy a house with a bad credit score, but that means that the mortgage you’ll qualify for will have a higher interest rate. This means that you’ll end up paying more than expected throughout the duration of your loan, but this is to give lenders more confidence that you’ll be timely with your payments.

There are plenty of options out there that will suit you best, so be sure to explore other mortgage rates and conditions. Your housing counselor will also be able to help you get the best deal possible for you.

Final Words

Everyone should be able to own the house of their dreams, even with difficult circumstances. Thankfully, there are ways to achieve this with the help of a housing consultant and a mortgage broker. By working together, you’ll be able to find the perfect house that’s compatible with your budget. Reviewing all your housing and financing options and making some adjustments will help you achieve this major milestone of owning your very own home.

Looking for a professional to help you with mortgage loans? Give us a call at Move Mortgage. We’re a mortgage lender in Colorado that seeks to help our clients buy their dream homes.