It is possible to buy a house, even if you have bad credit. There are a number of options out there to help borrowers with poor credit or low income to purchase a home. Consider looking into an FHA loan, or a VA loan if you’re a veteran.
Having poor credit can affect your life in a number of ways. It’s more difficult to get favorable loan terms and conditions, more difficult to get credit cards, and you may not even be able to get approved for an auto loan or a mortgage. If you’re in a situation like this, you should know that there are ways to get the loan you need, and there are ways to improve your credit.
Although a traditional mortgage lender may not approve your application if you have poor credit, there are still ways to make it happen. An FHA loan is one of these options. FHA stands for Federal Housing Administration, and it’s essentially a government program that helps low-income borrowers buy houses. The FHA works with mortgage lenders to insure the mortgages that they provide to borrowers with low credit scores and income.
Although you can get an FHA-insured loan even with bad credit, there are still a number of requirements you have to meet in order to be approved for one:
- A 3.5–10% down payment on the house
- A FICO score of 500 or above
- A debt-to-income ratio of 43% or below
- The house must be your primary residence
- Steady income and proof of employment
If you meet these requirements, then an FHA loan may be the right choice for you. Keep in mind that buying a home is a huge responsibility. If you have any doubt or aren’t sure that you’ll be able to keep up with the payments, then keep working on improving your credit score and saving money. This way, you may be able to avoid an FHA loan and get approved for a more prime mortgage in the future.
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