How to Buy a Home With Bad Credit and a Foreclosure

Homeownership may be within reach.

Bad credit and a foreclosure won't automatically disqualify a consumer from buying a home. Although a credit score of 620 is generally considered to be the cutoff for "good" credit, it's possible to buy a house with a much lower credit score---and an old foreclosure.

Warning

Buying a home with bad credit and a foreclosure on your record means finding a lender comfortable with lending to bad-credit borrowers. You may pay a higher interest rate and fees than borrowers with higher credit scores and no foreclosures.

Time Frame

The Federal Housing Administration has flexible lending policies, including its position on foreclosures. Generally, the administration requires that at least three years have passed since your foreclosure. The agency also approves borrowers with credit scores as low as 500, according to "The Washington Post."

Solution

Identify lenders comfortable with bad-credit borrowers or those offering Federal Housing Administration loans by working with a real estate agent skilled in this area. Get free financing advice from the U.S. Department of Housing and Urban Development, known as HUD. Call 800-569-4287 to find a HUD-approved counselor near you.

References

• HUD: Talk to a Housing Counselor
• FHA Mortgage Center: Overcoming Credit Issues
• "The Washington Post": The FHA's Balancing Act