How To Buy A Home With Bad Credit And No Money Down
For many, the home you purchase will be one of the biggest investments you’ll ever make. Owning your own home has obvious benefits and other benefits you may not be aware of. One of the biggest being that you can stop paying your landlord’s mortgage and start paying your own (woo!).
A home you own is an asset that can generate you an income (if you want), it can be sold for profit (if you know how to do so), or that can be transferred from generation to generation (pass it on to your children). Owning a home is one of the seven cures for a lean purse discussed in the book, “The Richest Man in Babylon” by George S. Clason (if you haven’t read it yet, we highly recommend it).
All of these benefits sound great, don’t they?
So, how do you buy a home with bad credit and no money down?
For most people who struggle with less than perfect credit scores, no credit, or little to no money saved, the option to purchase a home seems like it is out of the question; or so you think. There are many ways someone can still buy a home with bad credit and little to no cash on hand.
Below is a list of programs that allow you to buy a home with little to no money down and bad credit.
No Money
Getting approved for a mortgage with no money down can be a little challenging. No worries below are some programs that you may qualify for.
VA Loans
A VA loan is a loan designed for veterans who have qualified for a Certificate of Eligibility and meet their mortgage lender’s eligibility requirements. Many lenders work with VA loans to get you approved for little to no money down. Some lenders may even pay your closing costs so that you get into your home with as little up-front investment as possible. To determine your eligibility for a VA loan speak with a trusted mortgage lender that works with VA loans or visit the VA website for more details.
Native American Direct Loan
If you are a Native American U.S. Veteran and/or your spouse is Native American then you may be eligible for the NADL program if you plan to build or purchase a home on Federally recognized trust, allotted lands, Alaska Native corporations, or Pacific Island Territories per the va.gov website. Benefits of this loan are its direct lender relationship with The Department of Veteran Affairs, no down payment, no PMI requirement, low closing costs, reusability and more.
Navy Federal Credit Union
Another military member benefit is access to the Navy Federal Credit Union’s 100 percent financing loan. To qualify you need to be a current or retired member of the military or family member. Additionally Department of Defense civilians may also apply. Benefits are no down payment options, no PMI required and fixed interest rates.
U.S. Department of Agriculture Loan
Do you plan on living in a rural or suburban area? You may qualify for a USDA Loan. The qualifications of this loan can vary from county to county and household size. Partner with a trusted mortgage lender or visit the USDA website for more eligibility requirements. Benefits of this loan are zero down payment and low-interest rates.
Federal Housing Administration Loan
FHA Loans are extremely popular with first-time home-buyers. This loan allows for a lower down payment as little as 3.5 percent and you may be approved with credit scores as low as 580. While this loan requires a down payment, it allows you to purchase a home if you do not qualify for other mortgage loan programs. For further eligibility requirements visit the FHA website.
Rent To Own Home Ownership Programs
Another option that is gaining in popularity is the rise of rent to own home ownership programs. There are companies and investors that will purchase a property for you and lease it to you with an option to purchase it from them at a later date. This is a great alternative to traditional mortgage programs if you are having trouble getting approved. This program allows you to purchase a home if you are facing credit and down payment hurdles.
You won’t own the home in the beginning. You will start off as a tenant but you will work your way towards being able to secure the deed of that home with your own financing. The terms are usually set by the owner or investor of the property and don’t require perfect credit or a down payment upfront to enter this agreement.
Owner Financed Programs
Much like rent to own homes, owner financed homes are a direct agreement between you and the owner of a property that allows you to make payments that go towards the purchase of your home. The eligibility requirements, credit standards, and down payment of these types of home-ownership programs will vary from owner to owner.
How To Improve Your Bad Credit
First and foremost, if you have the time, you should work towards improving your credit scores as it will allow you to get approved for more preferable mortgage loan programs. We have developed a free guide that walks you step-by-step in fixing your credit.
Fix Your Credit Yourself
You can definitely improve your credit all on your own with hard work, dedication, and persistence. The first thing you want to do is request a copy of your credit report from all 3 credit bureaus. By law, you are allowed one free copy of your credit report each year. Additionally, you can sign up for a credit monitoring service that will provide you with a 3-bureau report and your credit scores. Don’t worry, pulling your own credit with these types of services do not have an impact on your credit scores.
Inspect your credit reports for inaccuracies, unverifiable information, data errors, incorrect dates, incorrect payment history, fraudulent inquiries, and more. Dispute anything that seems questionable, inaccurate, or unverifiable.
Keep copies of each dispute you send for your records. Allow the bureaus 30 days to reply and adjust your strategy based on their correspondence.
Hire A Professional Credit Repair Company
If the task of repairing your credit seems daunting or if you’re questioning your ability to properly dispute inaccuracies with the credit bureaus and/or debt collectors, then you may want to consider hiring a professional credit repair company to handle all of this for you.
When selecting a credit repair company to fight the credit bureaus on your behalf, we highly recommend doing your homework. Look at their reviews, check if they are licensed and bonded in the state they are conducting business in, and see if they are registered members of NACSO (an organization dedicated to credit services companies that hold themselves to a high ethical standard).
Shameless plug: We at The Credit Agents pride ourselves in our ability to help individuals overcome the obstacles of poor credit and move on towards achieving life-long goals (such as home-ownership). If you’d like a free 15-minute credit review, then please call us at (281) 756-7060 or request a call on our website. Check out our reviews and testimonials.
As you can see there are options available to you that allow you to purchase your share of the American dream with no-to-little money down and bad credit. In order to determine which route is best for you, you should always consult with a licensed mortgage professional or a licensed real estate agent.