Bad Credit? You Can Still Buy A Home

Not all couples will have the same credit score – at some point, you or your partner will have a bad credit score as a result of past decisions or current financial mistakes. However, a bad credit score does not represent the overall financial picture of a couple – maybe one of you has strong credit score, you both have been saving diligently to buy a house, and/or you both know that the low score is just a temporary issue. Improving that credit score is the ideal path – but this can take time. Instead of giving up and missing out on purchasing the home you both have been aiming for, consider the following options:

– Let the person with the best score apply for mortgage on his or her own.

Instead of taking out a mortgage jointly, let whoever has the best credit score apply for the mortgage alone. But before taking on this approach, make sure that the person taking the loan has the sufficient income and assets that satisfy all the requirements from the lender.

– If the former scenario is out of question, then consider pleading to your mortgage lenders.

Remember that mortgage lenders can always make exceptions as long as you can provide reasonable explanation of your circumstances and evidence that the low credit score won’t affect your ability to pay the mortgage. This also depends on who your lender may be, but if you think you can plead your case then make sure you give proper documentations that can prove you and your loved one can meet the monthly payments promptly. One downside that you should consider is that you both may end up paying a higher interest rate if your joint application gets accepted. A bad credit score puts you two under the risky category, hence the lending entity will charge more than the normal rate.

– Find federal mortgage programs

Aside from banks, there are several state and local programs that help those with bad credit to get mortgage approvals. Consult with a lender who works with the Federal Housing Administration (FHA), since FHA have loans that are more forgiving towards bad credit scores. FHA can insure mortgages with credit scores as low as 580 – any score below that may require larger down payment.

– Find a co-signer with a good credit score.

If none of the previous options apply to you two, then consider getting a co-signer who has a good credit score and low debt to obtain the mortgage you both need. This is not an easy decision to make and requires careful evaluation of all the potential risks that may result. For instance, if anything unexpected happens and you (or your spouse) cannot pay the loan, the burden will also fall on the co-signer. Make sure to consider other alternatives before pursuing this route.

Don’t let a bad credit score hinder you from acquiring that home you and your partner always wanted; however, make sure to assess all the alternatives available and choose the option that suits your financial picture the best.


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