How to Buy a Low-Cost House With Bad Credit

Having a low credit score not only affects the kinds of credit cards you can have, but it also impacts the amount of a home loan (if any) you may obtain. You'll also be subject to an increase of several percentage points to your mortgage rate. However, if you have found a low-cost house you simply must have, there are a few different options available to you, even with a low credit rating.

Instructions

1

Pay in cash. If you have enough money to cover the entire cost of the home, it does not matter how bad your credit rating is. By covering the entire price of the home yourself, you do not need to go out and obtain a mortgage. This might be your best option when your credit score is low.

2

Borrow money from friends and family. Although it is possible to put a strain on relationships by doing this (especially where a large amount of money is concerned), most individuals will not charge you an interest rate--and even if they do, it will likely be far lower than what the banks will give you. Make sure you come up with a payment period and timetable for returning the money to your friends and family.

3

Visit your own bank or credit union. Financial institutions are more likely to give you money if they know you. Apply for a mortgage and provide past tax returns (to prove you have income). Although the bank will see your credit score is low, they may offer you some sort of mortgage. Be aware your interest rate may be rather high (several percentage points above the current rate). This is because you are considered a higher risk at defaulting on the loan.