A less-than-ideal credit score can be a difficult burden to bear, but it shouldn’t prevent you from buying a home. In general, most direct mortgage lenders like to see a minimum credit score of 680, though many people can still get approved for a Federal Housing Administration insured loan with a score of 620.
If your credit score isn’t where you’d like it to be — but that dream house is — there are still a number of things you can do to get so-called “bad credit home loans” from reputable home mortgage lenders. Consider these tactics before you give up on finding a way to finance your new home.
Offer a Higher Down Payment
Show mortgage companies that you mean business by offering a significant down payment to offset your low credit score. If your credit has been tarnished by an ugly past debt that’s since been wiped clear, this is an excellent way to demonstrate how you’ve turned a new financial leaf and might even allow you to negotiate for low interest home loans.
Every time you shop around to compare mortgages, lenders have to check into your credit — which can affect your score, so don’t take too long. The moment you hear the numbers for a mortgage rate that you can work with, lock them in. Bad credit home loans are possible, but they’re not as common as they have been in the past.
Work on Your Credit
It may sound obvious, but the best way to avoid an undesirable search for bad credit home loans is to make sure you don’t have bad credit in the first place. Start by analyzing your spending habits. Your score can be negatively impacted by opening too many cards within a short period of time, failing to meet payments on your credit cards or other loans, overdue taxes, overextended lines of credit, or delinquency on child support or alimony payments. Taking corrective action in just one of these areas can often boost your score enough to get you the loan you deserve.
On the other hand, if you’re having a difficult time securing home mortgage rates, be sure to talk with your lenders to make sure it’s not simply because you’re asking for too much in the first place. While a dream home may only come around once in a blue moon, it’s always best to stay within your means, especially when you struggle with credit.