There are a number of ways that you can get help to buy a house with bad credit. For example, you can apply for mortgage assistance from the United States Department of Agriculture. These loans don’t require a down payment or PMI and they don’t check your credit score. Instead, lenders look at other aspects of your financial history. After you’ve been approved for mortgage help, you should work to improve your credit score. This is important because your credit score is used to determine the interest rate that you will pay on your mortgage. A high interest rate can cost you tens of thousands of dollars over the lifetime of your mortgage.
Credit scores of 620 to 699 help buy a house with bad credit
With a credit score in the middle of the range, you can buy a house with bad credit without being turned down or charged higher interest rates. Many people think that middle-of-the-road means “okay.” In reality, this range falls somewhere between “Poor” and “Non-Prime.” Different lenders view these scores differently, so you may be rejected for credit even if your credit score falls in the middle.
With a credit score in the mid-600s, borrowers become prime borrowers, which means that they have a good history of on-time payments and are less likely to become delinquent on their loans. They also have better negotiating power with lenders over loan terms. Typically, only 15 to 30 percent of borrowers with this range become delinquent.
Saving money for a down payment
A down payment is often a huge investment, so you should save as much as you can. A high-yield savings account can grow your money faster. Moreover, you can set up a direct deposit to contribute to your savings every month. This way, you will be able to contribute towards your down payment automatically.
You can also take advantage of bank matching programs. Some banks, like Lower, offer a match of up to $500 to help homebuyers.
Getting a VA loan
If you are a veteran with bad credit, you might be worried about getting approved for a VA loan. While your credit score is still important, you must also show that you have made consistent payments in the past two years. In addition, you cannot have any major credit events in the past two years. If you have filed for bankruptcy or had a foreclosure, you cannot qualify for a VA loan. However, if you can demonstrate that you have made on-time payments for the last 12 months, you can be approved for a VA loan even if you have a small amount of credit history.
If your credit score is below 620, you may still qualify for a VA loan. Lenders may have other requirements. A good debt-to-income ratio and a large down payment can help prove that you are financially stable.