Can You Buy a House with Bad Credit?
How Your Credit Score Affects Buying a Burbank Home

Can You Buy a House with Bad Credit?

It is very possible to buy a house with bad credit, but it can be more challenging and have different requirements than someone with good credit. When a lender is approving you for a mortgage, they take into account your overall financial situation. While they do factor in credit score, lenders also look at your income, debt to income ratio, and your assets.

If you have a large savings that can lead to a sizable down payment, as well as high income, this can tip the scales in your favor. If you can buy a house with an all cash offer or have a significant sum of money to put down, your credit score may be less important.

If you do end up having monthly payments on your home with a bad credit score, you will likely end up having higher interest rates. Therefore, by having higher funds to put toward a down payment, it will balance out your higher priced payments due to your increased interest rate.

How To Buy a House with Bad Credit

To buy a house with bad credit, you still have several different loan options. However, some of these may be more difficult to qualify for than others. Conventional loans usually require a minimal credit score of 600, but FHA loans only require a 500 credit score. These types of loans are often attractive to first time home buyers.

To determine the right type of loan for you, talk to your lender. A lender might also have suggestions on how to increase your credit score. They can advise you on your credit utilization, types of credit, age of credit history, amount of new credit, and payment history. All of these factor into your credit score, so if you can improve upon them, you can easily increase your credit score.

Conclusion

While buying a house with bad credit is difficult, it is not impossible. You have many options when it comes to a home purchase, and a lender will be able to guide you in the right direction. If you are looking to buy a house but have a subprime credit score, you will likely need to have a higher down payment, higher income, and lower debt.