How to Buy a House with Bad Credit?
Buying a house with bad credit or low credit score can be challenging, but it’s not impossible. Buying a house requires having money for a down payment, a solid credit profile and a steady income. You will also need to meet the lender’s minimum credit score requirements. It’s possible to buy a house with bad credit, but it will likely end up costing you extra money in the long run. Read what kind of option available for buying house with bad credit.
What is the Lowest Credit Score to Buy a House?
Theoretically, you can qualify for a mortgage with a credit score as low as 500, but you’ll be limited to government-backed FHA loan. With a credit score from 500 to 579, you’ll need a down payment of at least 10% for an FHA loan (though these lenders are harder to find). Most lenders will issue FHA loans and VA loans to borrowers with credit scores as low as 580. Most of the Arizona down payment assistance programs require that you have a minimum credit score of 640.
NACA
The Neighborhood Assistance Corporation of America (“NACA”) is a non-profit, community advocacy and homeownership organization. NACA’s primary goal is to build strong, healthy neighborhoods in urban and rural areas nationwide through affordable homeownership. NACA has made the dream of homeownership a reality for thousands of working people by counseling them honestly and effectively, enabling even those with poor credit to purchase a home.
HUD Section 184 Native American Home Loan
The Section 184 Indian Home Loan Guarantee Program is a home mortgage product specifically designed for American Indian and Alaska Native families, Alaska villages, tribes, or tribally designated housing entities. With Section 184 financing borrowers can get into a home with a low down payment, no minimum credit score required and flexible underwriting.
Consider Lease to Own
Search properties and include “lease to own” listings. With lease to own, part of the rent money will go to the down payment of the house. By the end of the lease period, the landlord will sell the property to the tenant. This is a workable option for home buyers who do not have credit, but have cash.
You might be interested: Lease with a Right to Purchase Program in Phoenix area
Consider Seller Financing
Seller financing simply means that the owner of the property is willing to finance the purchase. So a buyer who can’t pay cash does not need to get a mortgage from a bank or other lender. Seller financing also called a “seller carry” or “seller carryback”.
Consider Hard Money
Hard money loans are essentially a type of asset-based financing in which the borrower acquires funds that are secured by real property. Rather than looking at your credit score, hard money lenders decide whether to lend you money based on the property for which the funds will be used. You can expect a higher interest rate with a hard money loan.
Start Improving Your Credit
If you can’t get approved for a mortgage right now, there are ways to increase your credit score. As a potential homebuyer, it’s important to reduce debt, accumulate as much cash as you can and review your credit history. Knowing your creditworthiness is an essential step in buying a home.
Wondering How Much You Can Afford?
Click here to access the Mortgage House Payment Calculator. Simply add in the price of the home you are considering and the calculator will return your estimated house payment. Change length of loan and interest rates to adjust results.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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