Having bad credit can spell difficulty in getting a traditional mortgage loan.
But wouldnt getting off the rent cycle treadmill be a first step to rebuilding your finances?
Even open credit report disputes can make a mortgage lender say no.
Trying to calculate your housing budget? Here’s how to determinehow much house you can afford.
If your credit score is low, youre considered high risk.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Scores above 640 are generally considered lower risk.
The cutoff score can vary based on the lender.
Borrowers with scores below 579 might find it difficult getting credit or finding decent loan terms at all.
But a general rule of thumb is that620 is a standard minimum for a conventional mortgage.
Here are six strategies for homebuyers with less-than-optimal credit.
Save for a Larger Down Payment
Sometimes your credit is only part of the problem.
What can make it even harder are the debt-to-income ratio rules that lenders often use.
Lenders want to see you using less than 43% of your income for all debt repayment.
But what if youre still above the 43% mark?
A simple solution is to start saving.
They also wont charge you loan fees and can be more flexible about terms.
And the advantages of borrowing from family for a home go both ways.
Parents or siblings might appreciate making a decent return on their money compared to whats available from savings accounts.
Of course, thats only if youre extremely vigilant about your payments.
No homebuying timeline is worth alienating the people closest to you.
Because of that, this should be a last-resort method.
At the same time, there are also seller financing options.
), you could deal directly with the current homeowners.
Lenders will still consider your low credit score or other credit problems.
Look Into an FHA Loan
Most conventional home loans are held privately, by lenders like banks.
For a $100,000 house, thats $3,500.
And if your job history is a problem, an FHA loan might be able to help.
Going this route does mean a bit more hassle, though.
These are private loans that are partially backed (25%) by the government.
Because of the governments backing, banks can lower eligibility requirements.
So whats the catch?
Theres always a catch, right?
Though you wont have to pay PMI, VA loans come withfunding fees.
We get it: Not many of us are sitting on a six-figure pile of money.
With bad credit, that may be even less likely.
But steering clear of banks entirely means your credit score doesnt matter.
Hereshow to buy a house in your 30swithout a mortgage.
But somesmall banks and credit unionskeep loans in their portfolios with more flexible qualification rules.
OK, so its not a quick solution.
Start by looking at how to raise your credit score.
Here are 10 tried-and-true ways tobuild good credit.
Robert Bruce is a senior staff writer at The Penny Hoarder.
Steve Gillman is a former contributor.
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