3 Ways to buy a house with bad credit

by Kim Minton 04/30/2023

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
Author

Kim Minton

Having spent the last 23 years in the Santa Clarita Valley, Kim Minton has witnessed the tremendous change and growth that’s transformed the area into one of the sought-after destinations to live. Kim specializes in all facets of the Real Estate business, whether it is navigating the way for first time buyers, trying to score that perfect distressed property or helping a homeowner sell their home for top dollar. Kim also is very knowledgeable and sells in the San Fernando Valley and Los Angeles areas. Having many clients in Law Enforcement and in the Film Industry she understands their hectic schedule and makes herself available 7 days a week and easily accessible by phone during off hours. Kim’s creative, enthusiastic, patient and caring nature is perfect for matching each clients desires with their dream home as well as skillfully featuring a home’s unique presence and character when listing. Her main intention is to understand her clients needs by listening and build a relationship that will last over the course of time. While orchestrating deals for her buyers and sellers, Kim is a strong negotiator and advocate for her clients, she is just as much compassionate, friendly and a humorous partner that eases the process that can often times be stressful.