Buying a home can be an overwhelming process, especially if you have bad credit. There are several ways to overcome this obstacle and get the financing you need for a new home. Government and nonprofit grants are available to help people with bad credit purchase a home. Other options include putting down a larger down payment or finding a co-purchaser.
Government and nonprofit grants for buying a home with bad credit
Government and nonprofit programs offer down payment assistance that can help you afford the down payment on a home. The amount of assistance depends on your income and the price of the home. Some programs offer a percentage of the down payment, while others cap the assistance at a certain dollar amount. It’s important to learn more about the programs and make sure they work for you.
Another option is to apply for a home loan through your local credit union or community bank. These institutions often have low-interest loans to help with your down payment and closing costs. These loans are meant to be paid off over a few years. Other programs offer deferred-payment loans that don’t charge interest but must be paid back when you sell or refinance the home.
Getting a mortgage with a low FICO score
If you’re struggling with a low FICO score, there are several options available to you. Traditional fixed-rate mortgages typically require a minimum FICO score of 620. However, there are low-credit mortgage lenders that will issue you a mortgage with a lower interest rate.
These low-credit mortgage lenders have different qualifying requirements for their loans. Some of them will offer free credit score improvement programs to help improve your credit. You should also check to see what your credit score is right now. Obtaining a copy of your credit report is a great way to see how your score has changed in the past year.
Getting a co-purchaser
A co-purchaser is someone you can rely on to help you get a home loan. Their income and assets will be considered along with yours when determining whether or not you qualify for a loan. This can help you get approved for a bigger loan amount compared to if you were the sole applicant.
Typically, the person who co-purchases a home with bad credit is a spouse or partner. A co-purchaser can help you get a lower interest rate, but it will be necessary to have someone with good credit. If you want to be approved for the loan, the co-purchaser’s income should be higher than yours.
Putting down a larger down payment
While putting down a larger down payment on a home with bad credit is a common practice, it’s not mandatory. In fact, many loan programs only require a few percent down, and some may require no down payment at all. In a conventional loan, putting down at least 20% is necessary to avoid paying private mortgage insurance. But most home buyers put down less than 20%.
If you want to put down a larger down payment, you need to consider your financial situation and future goals. You may not need to put down a large amount of money right now, but if you plan on living in the home for years, a larger down payment will help you secure the home of your dreams.
