With the rising rent across the country, more people have been looking for a way out. Some believe that because they have a low credit score that there is no hope for them to get approved for a mortgage. However, depending on where your credit score currently sits, you may be eligible despite having a subpar score.
Working Around A Bad Credit Score
According to the article “Mortgage possible with credit problems,” you could work around your bad credit score by bringing more money to the table. Depending on your score, you will most likely have to have a larger down payment anyway but bringing more cash will reduce the amount you have to borrow. Furthermore, coming to the table with a larger cash reserve in the bank will also make the deal more attractive for the lenders since you have a greater means to cover the payments.
Looking at FHA Loans
Backed by the Federal Housing Administration, an FHA loan can give people the means to get out of the renter cycle and into their first home. With a credit score of 580, you can get approved with a down payment as low as 3.5%. If you are below the 580 mark, you can still get approved, but you will have to put down at least 10%. Although this can help those avoid renting indefinitely, be prepared for a higher interest rate. At the end of the day, you will be building credit and will own something when you have paid off the loan.
Other Loan Options
There are several other loan programs out there that are not well known. According to the article “9 grants and programs to help you buy your first home,” here are some of the top programs that may be worth looking into:
- USDA Loan:S. Department of Agriculture homebuyer assistant program with a focus on helping people purchase in certain rural areas.
- VA Loan:S. Department of Veteran Affairs offers homebuyer assistance for active duty members, veterans, or their surviving spouses.
- Good Neighbor Next Door: An assistance program offered by U.S. Department of Housing and Urban Development to aid law enforcement officers, pre-Kindergarten through 12th-grade teachers, firefighters and emergency medical technicians the opportunity to buy a home in defined revitalization areas.
Repairing Your Credit Score
If you are still unable to get approved for a loan because of your credit score, then the next step would be to begin repairing it. You are entitled to a free credit report each year. Review it and make sure there is nothing that is out of the ordinary. Start working on reducing the amount of debt you are carrying. You can consolidate credit cards into a loan to get a lower interest rate. Another stagy is to increase your credit line on your credit cards. This will improve your debt to income ratio for it will lower the amount of credit you are currently utilizing.