How to Obtain a Home Loan With No Credit and Low Income
Obtaining a home loan with no credit and low income is a realistic possibility, thanks to the Federal Housing Administration (FHA). FHA loans offer the easiest qualification standards and require, at most, a five percent down payment. You need a two-year work history and a gross income equal to 300 percent of your monthly housing payment. You may qualify with no credit, but not with derogatory credit.
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Things You'll Need
- Pay stubs for past 30 days
- W-2 forms for past two years
- Bank statements for past two months
- Copy of driver's license or state-issued identification
- Copy of Social Security card
Instructions
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FHA Loans
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Visit your local bank or mortgage broker and tell the loan officer you would like to apply for an FHA home loan. You may also apply online through the FHA website and receive a decision within 24 hours. The FHA does not lend money, but rather guarantees your loan, alleviating risk to the lender. Essentially, FHA is your co-signer.
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Ask about the "Officer Next Door" and "Teacher Next Door" programs. If you work as a police officer or public school teacher you may qualify to receive 50 percent off the appraised value of certain homes. The required down payment for these loans is $100.
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Obtain your down payment funds through a variety of grants and loans. These programs vary from state to state and sometimes even by county. One example is the California Housing Down Payment Assistance Program (CHDAP) offering loans of up to three percent of the appraised value of the house. Another is Neighborhood Gold, a 501 (c) (3) nonprofit offering cash grants of three to ten percent of the home's appraised value to be used for down payments and closing costs.
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Go shopping for your new home. Once you know the amount for which your FHA loan is approved, you may target your search to homes you can realistically afford.
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Look into purchasing a Department of Housing and Urban Development (HUD) home. These are properties purchased with FHA-backed loans that went into default. FHA has already paid the outstanding balance to the lender and turned the property over to HUD to be sold at market value.
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Consider buying a "fixer-upper" and repairing the home. Properties that are not up to code may be purchased using an FHA 203 K Rehabilitation Loan. These loans are available for up to 98.15 percent of the future value of the home. You must bring the house up to code before you can resell, and repairs must total at least $5,000. HUD Homes, condominiums and one to four family dwellings are eligible.
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Tips & Warnings
Consider contracting with an experienced Realtor to represent you in your home search. Most receive pay by commission, and you typically do not incur additional expenses by having your own Realtor.
