First-Time Home Buyers with Bad Credit: What To Do

Buying a home is stressful, especially when it’s your first time. There are so many questions bound to arise, and so many things to consider. First-time home buyers with bad credit will have even more stress and steps on top of what is already expected. If you have your heart set on a new house, but have bad credit, you’re not out of luck. Here’s what you should do.

First-Time Home Buyers with Bad Credit: What To Do

Find a lender who will work with bad credit

If you have low credit – or no credit – there are people who will work with you. It’s possible that you will have to contact several lenders before you find the right one. Most lenders require that you have at least a 620 credit score before agreeing to work with you. However, once you find that golden lender, it will help immensely.

Check out FHA loans

FHA loans are very popular among first-time home buyers. With these loans, you can qualify with a lower score. The required score here is 580, with a 3.5% downpayment. You’ll also have to show stable employment of at least two years with the same company or in the same line of work. Verifiable income is also required through W2s, tax returns, paycheck stubs, and bank accounts. With FHA loans, you can’t have any late payments within the last year, although there are some exceptions.

No credit check with FHA loans

If you have no credit, some lenders may be able to get you a loan. To do this, they’ll use alternate lines of credit, such as utility bills, phone bills, and rent payments. This will establish a positive payment history. You’ll only get this established if you really do have a positive payment history, meaning no late payments in the last year.

Shop for the best mortgage rate

It’s recommended that you get quotes from at least three lenders. Interest rates and loan fees will vary from lender to lender, so getting multiple quotes will ensure you’re getting the best deal. Don’t worry, all these inquiries won’t hurt your credit. FICO allows a 30-day window for “rate shopping” when inquiries from different sources will only count as one inquiry.

Improve your credit score

Improving your credit score is not only a way to get a better mortgage, but it will also give you peace of mind. We can help you improve your credit in 30 days to help you get on track to getting that loan even faster. Making sure your credit score is at its maximum before submitting your contract will help make the purchasing process easier and will also help you get a better interest rate.

First-time home buyers with bad credit can still get that house they’ve been eyeing. If you have any questions regarding the process or improving your credit, give me a call at 480-560-6342.