How to Get a House Loan With Bad Credit

If you have bad credit, purchasing a new house may seem like an impossible task. Lenders do not like risks and if you have a low credit score, getting approved for a traditional loan may be impossible. However, there are many different options available that will allow even those with bad credit to become homeowners.

Things You'll Need

  • financial statements
  • seller contract

Step 1

Apply for a Freddie Mac loan. This federal lender has a program that is designed for those who may have bad credit or past foreclosures. It is designed to help those with low income or poor credit scores. It features a fixed rate, low interest terms and assistance with closing costs.

Step 2

Apply for a Fannie Mae loan. If you want to take advantage of Fannie Mae assistance programs, you will need to find a lender in your area that is a Fannie Mae certified lender. If you are approved for this federal program, they will guarantee your loan for you through that lender.

Step 3

Apply for an FHA loan. Thousands of homes are purchased every year with the help of an FHA loan. This program is available through the Housing and Urban Development department of the federal government and offers 97 percent financing, as well as help with closing costs and low-interest rates. The terms are typically quite attractive and lower credit scores are considered.

Step 4

Apply for a USDA rural housing loan. If you have found a property that is outside of the city limits or in a small town, it may be eligible for a USDA rural housing mortgage. This program offers 100 percent financing, seller's assist to handle closing costs and once again, a low, fixed-interest rate. Income limits do apply, but the USDA does accept lower credit scores for this program.

Step 5

Get seller financing. If you are ineligible for any of the above federal loan programs, it is best to seek out a seller willing to offer you financing. With this type of mortgage, you will have to supply a down payment and be able to cover closing costs. The seller will need to see financial records, but typically they will not run your credit history. First impressions count a great deal with seller financing and, quite often, the contract is based on whether or not a seller feels that they can trust you. Interest rates for this type of financing will vary from seller to seller.

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