How to Get a Loan for a House with Bad Credit

Bad credit can make it tough to get a loan for a house , but it’s not impossible. Here’s how to get a loan for a house with bad credit.

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Check your credit report

The first thing you need to do is check your credit report from all three credit reporting agencies: Equifax, Experian, and TransUnion. You’re entitled to one free credit report from each per year. Go to to request them. Check for errors and dispute any you find. Then, start working on paying down your debt and raising your credit score.

If your credit score is too low toqualify for a conventional mortgage, you might be able to get an FHA loan with as little as 3.5% down. You will, however, have to pay mortgage insurance, which will increase your monthly payment. If you can’t qualify for an FHA loan, you might be able to get a USDA loan, which has even stricter income requirements but provides a no-money-down mortgage option if you qualify.

Find a cosigner

One way to get a loan with bad credit is to find a cosigner. A cosigner is somebody who agrees to take on the responsibility of the loan if you default. This means that if you can’t make your payments, your cosigner will have to. Because of this, lenders are more likely to give you a loan if you have a cosigner with good credit. If you default on the loan, your cosigner’s credit will be ruined as well, so it’s important to make sure that you can afford the payments before you take out the loan.

Look for a government-backed loan

Regardless of your credit score, you could qualify for a loan backed by the federal government. The two main programs are the Veterans Administration (VA) loan, available to active-duty military members and veterans, and the Federal Housing Administration (FHA) loan, which is available to everyone else.

With a government-backed loan, the lender is guaranteed to get their money back if you default on the loan, so they’re willing to take on a bit more risk. That means you might be able to get a government-backed loan even with a credit score as low as 580.

Of course, there are downsides. For one, government-backed loans often come with stricter requirements, such as having to buy private mortgage insurance (PMI) if your down payment is less than 20%. But if you can find a government-backed loan that works for you, it could be a great way to get into a house with bad credit.

Consider a bridge loan

If you have bad credit but still need to buy a house, you may be able to get financing through a bridge loan. Bridge loans are temporary loans that bridge the gap between the purchase of a property and the time when permanent financing becomes available. These loans are often used by people who are buying a property before they sell their current home, so they can use the equity from their current home as collateral for the loan. Bridge loans typically have high interest rates and fees, so they should only be used as a short-term solution.

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