How To Get Home Loans If You Have A Bad Credit?

Posted by Maverick Lewis on December 14th, 2022

There are many different home loans available for people with bad credit.

Also, the good news is some of these loans are designed specifically for those people with bad credit.
Thus, if you are struggling with a poor credit score and unable to get the desired loan amount, read down to solve your issues and qualify for the loan today!

What Is The Lowest Credit Score To Buy A Property?

The lowest possible credit score for buying a house is 500. 

Fortunately, specific mortgage lenders accept such credit scores at a typically high-interest rate. 

Loan Options For Bad Credits 

As mentioned above, there are several loan options available for low credits. But you don't have to invest your time in deciding the right match for you. 

We have compiled the 7 Best home loans option for bad credit scores and who qualifies for these programs. 

1) Federal Housing Administration (FDA) Loan

Applicable for a 500 credit score

Federal Housing Administration (FDA) Loans have the lowest possible credit score requirement. In fact, you can even secure this loan with a 580 credit score. The minimum down payment is 3.5% of the home's purchase price.

2) Non-qualified mortgage (Non-QM)

Applicable for a 500 credit score

A Non-qualified mortgage (Non-QM) is a type that doesn't follow the traditional standards set by government-sponsored entities. The credit score needed for a Non-QM home loan can be as low as 500.

3) Veterans Affairs (VA) Loans

Applicable for 580 credit score

One of the best options for homebuyers with a bad credit score is a Veteran Affairs (VA) loan. You can get this loan with a minimum credit score of 580. And the best part is that you don't have to make any down payment.

4) United States Department of Agriculture (USDA) Loan

Applicable for a 640 credit score

If you want to buy a property in a rural area, you can opt for a United States Department of Agriculture (USDA) Loan. You can get this loan with a minimum credit score of 640. Moreover, the down payment required for this loan is as low as 0%.

5) Fannie Mae HomeReady

Applicable for a 620 credit score

Fannie Mae HomeReady is a great loan option for first-time homebuyers. Thus, you can get this loan with a minimum credit score of 620. The down payment required for this loan is as low as 3%.

6) Conventional Loans

Applicable for a 620 credit score

Conventional Loans are loans that the government does not back. You can get this loan with a minimum credit score of 680. The down payment required for this loan is as low as 3%.

7) Freddie Mac Home Possible

Applicable for 660 credit score

Freddie Mac Home Possible is another excellent loan option for first-time homebuyers. You can get home loans with a minimum credit score of 660. The down payment required for this loan is as low as 3%.

Tips To Get Home Loan On A Poor Credit Score

If you have a poor credit score, there are some tips that you need to follow to get home loans:

 1) Check Your Credit Score And Report

The first thing you need to do is check your credit score and report. Thus, this will help you determine the areas where you need to improve. You can get your score from any of the credit bureaus.

2) Improve Your Credit Score

Once you have checked your credit score, it's time to take steps to improve it. Therefore, there are various ways to improve your credit score, such as paying off your debts, maintaining a good credit history, etc.

3) Get Pre-Approved For A Loan

Getting pre-approved loans is one of the best ways to improve your approval chances for home loans. 

4) Find The Right Lender

Finding the right lender is essential to get approved for a home loan. Moreover, many lenders specialize in loans for people with bad credit. So, it would help if you found a lender willing to work with you.

5) Apply For A Loan

Once you have found the right lender, it's time to apply for a loan. Thus, the process of applying for a loan is simple. You need to fill out an application and submit it to the lender.

6) Get A Cosigner

You can get a cosigner if you have difficulty getting approved for home loans. A cosigner is someone who agrees to sign the loan with you.

7) Wait For The Loan To Be Approved

Once you have applied for the loan, you must wait for it to be approved. Therefore, the lender will check your credit history and score before approving the loan. So, if everything is in order, you will get approved for the loan.

8) Get The Loan

Once you have been approved for the loan, you will get the loan. You can use the loan to buy a house or make other improvements to your home.

Popular FAQs on Bad Credit Home Loan

Q: Can I get a bad credit home loan with no money down?

A: Some home loans, such as USDA and VA, require no money down. However, these loans are only available to some. 

Q: Can I get a bad credit home loan with a cosigner?

A: Yes, you can get a bad credit home loan with a cosigner. Thus, a cosigner is someone who agrees to sign the loan with you. This will improve your chances of loan approval

Q: What are the best bad credit home loans?

A: There are many types of bad credit home loans. The best loan for you will depend on your circumstances. It would help if you considered factors such as your credit score, down payment, employment history, etc.

Q: How can I improve my chances of getting approved for a bad credit home loan?

A: You can do several things to improve your chances of approval for a home loan. You can pay off your debts, maintain a good credit history, get pre-approved for a loan, and find the right lender.

Q: How long does it take to get approved for a bad credit home loan?

A: The time it takes for bad credit loan approval depends on factors such as your credit score, employment history, down payment, etc. The lender must also check your credit score and history before approving the loan.

Q: What is the interest rate for a bad credit home loan?

A: The interest rate for poor credit home loans is higher than that for a conventional loan. This is because bad credit home loans are considered to be high-risk loans.

Q: How much can I borrow with a bad credit home loan?

A: The amount you can borrow with a bad credit home loan depends on several factors, such as your credit score, employment history, down payment, etc.

Q: How do I know if I qualify for a bad credit home loan?

A: If your credit score is below 620, you may still qualify for a bad credit home loan.

Q: What are the requirements for a bad credit home loan?

A: The requirements for a bad credit home loan vary. The lender will check your credit score and history during pre-approval.

Conclusion

If you have poor credit and are looking to get home loans, don't despair. There are still options available to you. Talk to a mortgage specialist about your situation and see what they can do for you. In the meantime, try following some of the tips mentioned in this article to help improve your chances of getting approved for a home loan.