Buying a house can be an exciting yet confusing process. It can also be frustrating when you’re trying to buy a house with bad credit and don’t know where to turn for answers. Many people rent with the dream of going through the home buying process and becoming a first-time homebuyer. But if you have bad credit, you may think homeownership is out of reach.
Can you buy a house with bad credit?
The answer is yes. But what does a bad credit score mean, and what are the types of home loans available to those with bad credit? We’ll answer those questions and detail the necessary steps you need to take to buy a home with poor credit.
What do lenders consider bad credit?
Mortgage lenders and the Federal Housing Administration (FHA) look at a credit score range when considering a home mortgage loan. A credit score between 580-669 ranks your credit as “fair” and is regarded as a higher risk for a mortgage lender. Lenders view a score of 579 or less to be “bad credit.” Scores this low can make finding a home loan challenging but not impossible.
Your credit score tells a lender about your spending habits, payment reliability, and the likelihood of mortgage repayment. Low credit scores mean you’re a higher risk for a lender but do not have to mean your dream of owning a home has to come to an end.
| Poor credit | 300 – 579 |
| Fair credit | 580 – 669 |
| Good credit | 670 – 739 |
| Very good credit | 740 – 799 |
| Exceptional credit | 800 – 850 |
How to buy a house with bad credit
First, find out your credit score by getting a credit report. There are sites where you can get a free credit report, like FreeCreditReport.com. They provide credit reports from the three credit bureaus (Equifax, Experian, and TransUnion) at no charge.
Depending on your credit score, you may have some work to do, and it may take time to get the credit score needed to buy a house.
How to improve your credit score
Focus on these financial habits to help boost your credit…