How to Get a Loan for a House With a Low Credit Score
A low credit score won't exclude you from getting a home loan, but you may have to adjust your ideas about the ease and expense of obtaining the mortgage and the cost of the home you will be able to purchase.
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Instructions
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Check your credit record and score. You can find your credit score by visiting the Web sites of the three main credit bureaus: Experian, Equifax and TransUnion. Each charges a fee that varies on the type of credit program you choose. You need to know where you stand before you begin seeking a home loan. If your credit score is above the threshold of what is considered bad---generally 550---you likely will find it easier to obtain a loan.
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Seek out federal home loan programs. For example, the U.S. Department of Agriculture loan program provides low-interest loans with little or no down payment, even for people with low credit scores. If you are accepted, the federal government will guarantee to pay the loan if you default. You can find a list of several federal home loan programs at www.govloans.gov and going into the housing area.
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Bring the lender the largest down payment you can. Even small homes have large values. The bank weighs the cost of the home versus the amount of the loan. A down payment of 10 percent or more lowers the amount of the loan and makes it likelier that you will not be seen as a credit risk and will be accepted.
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Be willing to accept a higher interest rate. Lenders offer a variety of terms and interest rates, but borrowers with bad credit ratings are limited. The higher interest rate will increase your overall payment.
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Find a co-signer for your loan if your credit is very bad, if you don't have the money for a down payment or if you want a better interest rate. A co-signer is someone with a considerably better credit score who is willing to place that score on the loan along with yours. This can significantly lower you as a perceived credit risk. Do not hurt the co-signer's credit by paying late or defaulting on the loan.
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