You’re excited to buy your new home, but then you found out you have a poor credit score to qualify for bank loans. While this may appear as a huge obstacle hindering you from getting that dream home of yours, remember that every cloud has a silver lining. As a matter of fact, you can work your way around it!
Apply for a Government-Backed Loan
National Homeowners Foundation says one of your options is to apply for a government-backed loan, such as the Federal Housing Administration or FHA loans. As a matter of fact, you can get approved for an FHA loan, even with a credit score as low as 580 so long as you can pay a down payment of at least 3.5%, according to the Department of Housing and Urban Development.
Shell Out a Larger Down Payment
Speaking of down payment, there are banks and private lenders that are willing to give you a loan as long as you can pay an enormous down payment. Making a large down payment represents a signal to lenders that you have the capacity to repay the loan. This is an excellent option in case you have a huge savings account, and you’re not comfortable applying for a government-backed loan.
Ask Someone to Co-Sign the Mortgage
If you can’t get qualified on your own, another thing you can do is to ask someone else with a higher credit score to co-sign the loan. This could be your spouse or relative. Just expect that the lender will examine the co-signer’s debt-to-income ratio and other financial qualifications during the application process. Also, you should take into account that this option binds you and the co-signer in a close financial tie. Your relationship could be in jeopardy if you run into financial trouble, as your co-signer will have to repay the loan on your behalf.
With these options, it’s now clear that you can, indeed, buy a home with bad credit. It just boils down to selecting the best choice for your overall financial situation.