When you realize that your income is low and then you have bad credit, perhaps it comes to your mind that it is impossible to have a house in that situation. Wait! Don’t lose your hope! Now, having bad credit and low income do not mean that you cannot buy a house. Well, in this article we are going to give you some steps to achieve that.
The first thing that you need to do is checking your credit score. You can check your credit and get your free credit score online for free such as Credit Sesame and Credit Karma. Even you do not required to sign up. Next, you have to fix errors on your credit report. If you find any errors on your credit report you can deny with the three major credit bureaus. You also need to maximize your FICO scores. You have to ensure that your score is as high as it can possibly be before you apply for a home loan with mortgage loans. Several things that you can do to increase your FICO score are denying any errors, paying down your credit card balance, and getting collection accounts removed. Next, find low credit mortgage lenders. If you find a bad credit home loan it means it is a FHA loans. FHA home loans are offered by FHA-approved lenders. It has low credit score requirements of juts a 500 score with 10% down. But, you have to know that not all lenders will be able to work with low scores. So, you need to contact multiple lenders to discovers one which can work with your scores. After that, get pre-approved. To become pre-approved your loan officer will need to pull your credit and verify your income and bank documents. Now, find an agent and start house hunting.
FHA loans, besides can be used for you who have bad credit, it is also suitable for you who have low incomes. FHA loan is another government-backed loan type which helps people with low income to buy a home. Some highlights of this program are:
- The seller can pay all or most of your closing costs.
- 3.5% down payment.
- Permits lower credit scores than conventional financing.
There are also some additional features of an FHA loan which you will be interested in:
- The debt ratio requirements of FHA is more lenient than conventional financing which means that you can qualify with a lower income.
- The 3.5% down payment can come from down payment gift money.
- You will not be required to have extra money in the bank after you close the loan.
- You are able to use a co-signer (another party who contributes to the loan repayment but will not live in the home)
FHA is designed with low income families in mind. It has assisted millions break into home ownership despite traditional barriers. Hopefully, this information can be helpful for you who want to have house but you have bad credit and low income.