If you have a massive credit score and more than 20% down payment in your hand, lenders will seek you desperately and would do anything to get your attention. But what would be the scenario if your have a shabby credit score? Most probably, lenders will not entertain your application, and debt collectors will seek your attention continuously.
As per the conventional aspect, credit score of at least 650 can ease up the drill quite a bit. Most of the . It gives you a fair chance of qualifying for a conventional mortgage loan.
But if you have a low credit score, it doesn’t throw you out from the competition. So, , :
1. Federal Housing Administration loan
If it is not possible to get a conventional loan from a lender, FHA is the most logical option for a prospective homebuyer with a low credit score. These loans are given through lenders approved by the FHA. FHA is an agency, within the federal department of Housing and Urban Development (HUD). FHA loan may be approved for a person, having a credit score of as low as 580. FHA loan approval is provided for a 3.5 % down payment of the total loan amount. If you have a lower score, then that doesn't mean you can’t get this loan. , , , according to HUD. HUD itself has monthly and upfront PMI option, and the rates are quite low.
2. Focus on income than your credit score
Of course, credit score is important for us. Having a good credit score is the most important thing while taking any kind of loan. It's very easy to buy a home when you have a high credit score. But, if you've ruined your credit score somehow, then you must find a backdoor to fulfill your objectives.
So, even if your credit score has dropped, your money should talk. Don’t avoid the importance of making money. Your monthly income should remain constant, and you must save as much as possible from your earnings. Use savings to repay your old debts. The more you repay, your credit score will gradually increase.
3. Try seller financing for buying a house
This is a rare situation in the real estate market, but if you find yourself in a pity situation like this one, where you neither have good credit nor enough money, consider trying seller financing option.
Seller financing is a very simple thing. It’ll be possible only when the seller pays off his mortgage, or been paid off by the money from buyer's down payment. . This means you’ll make the payments directly to your seller. When your credit is restored enough, you can go for refinance option, and contact a mortgage lender.
4. Rent to own a house
You need to find a house with an owner, who’s trying to sell the house for many years. If you're also desperate to purchase it, then you too can make this deal successfully. , . You start paying your part of the rent, along with a major portion of amount towards down-payment of the loan.
After a while, you can buy your house as you’ve already paid the downpayment through the rent. . If later you don’t want to live in the house, you can step aside and walk away. The seller will keep the down payment provided by you, and also the house.
5. Go for a co-signer
It is your last option. If you don’t have good credit score, you can simply cosign the loan with a friend or relative who has good credit score. By this way, , . Lenders may not trust you, but if you can manage a person from your family or friends to cosign the loan documents, you can get the approval easily.
Make sure to select an affordable house and a mortgage loan, which you can pay back. You may find a big house and a lender, who is willing to give you the money. But if he’s charging a big interest on the loan, you might be in trouble in the long run.
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