Unless there is a rare circumstance, a person with a credit score under 620 can count on probably not being approved for a mortgage loan. Is it still possible to buy a house with a bad credit score? Of course it is. But your options are limited, and you may have a difficult road ahead of you. Here are some options to get a mortgage with a poor FICO score:
1. Prepare to pay more than you would if your credit were decent
People with poor credit can still get a mortgage, but they will pay much more than even those with only decent credit scores would. Sellers should be advised to do their homework on the mortgage brokers they are working with, as many lenders who are willing to approve people with awful credit tend to be on the shady side who prey on the desperate and the naive.
2. Re-finance the home immediately
A bad credit mortgage may seem like the borrower is signing away their life on a bad deal, but so long as the borrower maintains their credit after the mortgage is signed, they can be eligible to re-finance for a much better deal within two years, and their credit will have improved.
In short, a bad credit mortgage is a short-term solution that gets them in a home. It’s important to bear in mind that bad credit needn’t follow the borrower longer than necessary.
3. Ask about all of your mortgage options
Adjustable rate mortgages (ARMs) are also a possibility, depending on the circumstance, during which time the borrower can work on repairing and maintaining their credit while paying at a lower interest rate than are offered on fixed-rate mortgages.
4. Consider getting a co-signer
Many have some other assets, or have family members who are responsible. These people may be willing to co-sign. You should do your homework in this category as well, as there are many rules regarding co-signers and you should be armed with those.
Also check out this article on Low Credit Score Borrowers Can Still Get a Mortgage, and then also be sure to frequently monitor your credit score on free sites like CreditKarma and Credit Sesame.