Buying a Home with Poor Credit


So, you made some dumb purchases in college. Or, maybe you had to live off your credit card to eat (and go to the bar) while you spent time at that institution of higher learning.  Or maybe you just made a bunch of foolish purchases. But now, your credit is shot.  You have a good job; you are paying your bills, and you’ve been shoveling yourself out of debt for some time.

If you are finally in a place where you can afford to buy a house and the only thing holding you back the disaster that is your credit, no worries.  There is hope.  Go ahead and shop that Ottawa real estate or Google “home’s for sale in California.”  Shop anywhere you want because buying a home with poor credit is possible.  Just take a look!

Find out Your Credit Score

You need a starting point.  And, getting that FICO score is step 1.  There are a lot of places you can get your score, but is a free resource that you can use once a year to pull your credit.  Don’t fall victim those other companies out there and pay. 

After you get your report, it’s time actually to read it.  The first thing you need to understand about it is the score itself.

A score of 850 is a perfect credit score, and anything below 640 is cause for concern for lenders.  If you are above 740, you are in good shape.

Comb Your Report for Errors

After you’ve received your report, look through it.  There could be errors.  Look to see what accounts you have open.  If there is anything with a zero balance, close it.  If something is outstanding that you don’t know about, dispute it.  Fix any discrepancies you can.

If you don’t know where to turn to do so, turn directly to FICO, and they will guide you through the process.

Be Ready for Higher Interest Rates

If your credit is in rough shape, lenders will charge you more interest as a way to protect their investment.  There’s really no way around that.

What that means to you is a higher mortgage payment.  

The good news is, paying your mortgage on time will increase your credit score.  So, when your credit is no longer in the lousy bracket, you can refinance for a lower interest rate.

Apply for FHA Loan

FHA loans are loans insured by the Federal House Administration.  These loans typically require less of a down payment, and the credit qualification generally is lower.   To qualify for FHA’s minimum financing, you need a down payment of 3.5% of the purchase price along with a minimum credit score of 580.

Keep in mind, if you qualify for an FHA loan, mortgage insurance will be rolled into your payment as a way to protect the lender in case you default on the loan.


Owning your own home is a huge step towards independence and starting your life.  Don’t let your credit mistakes get in the way of that.  Do a little bit of leg work and find a company that will finance you.  There are places out there that will look at your current payment history and finance your house.  You just have to find them.


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