Bad Credit but we have a down payment

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I would like to know if there are any options for a home loan with bad credit? My husband, who is the sole bread winner at the moment has a score of 497. We are working to improve the status. We were recently gifted a down payment of $10,000. We would rather be paying toward a mortgage than $1,350 a month in rent. I found a house that I love listed for $189,000. I know it won’t be there if we wait until our credit score improves. We have the money to make the payments, just that bad credit following us.

Any advice would be much appreciated.


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If you have the money to put down, you may want to take a portion of those funds and work with a credit specialist. Someone with a proven track record in helping consumers to improve their credit scores. It is difficult and overwhelming for consumers to raise their credit scores with out help and guidance.

Answered over 1 year ago

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The minimum credit score that is allowed by a FHA loan is 500 and that will require at least a 10% down payment. Most lenders require at least a credit score of 580.

You will also need to have enough income so that all your debts (past dues showing up on your credit report plus child support, school loans, car payments etc) plus your new mortgage, property insurance and real estate taxes do not exceed 30% of your income.

Another option is to buy a house on a land contract. Instead of getting a bank loan, you finance with the seller. Typically a land contract lasts from 3 to 5 years and then you pay off the full amount and get a traditional mortgage. This would give you time to repair your credit.

Answered over 1 year ago

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You’re not going to get a conventional (Fannie/Freddie), or government guaranteed (FHA/USDA/VA) loan with scores that low. IF you really want to purchase a home now, and are very sure your income is reliable enough to commit to a mortgage, your best (and likely only) option is to find a seller who is willing to either do a lease/purchase option or seller financing. I’d also be examining your credit to see how you can improve it. If you don’t have revolving accounts with good credit histories, I’d recommend taking out a couple of secured credit cards, and start by asking your bank if they offer them. You need to get some positive credit reporting to help (eventually) offset the items that have pulled your score down. Hope that helps.

updated over 1 year ago
Ted Rood
1344 6
Answered over 1 year ago
Ted Rood
1344 6

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Some lenders have credit repair specialists who will work with you long term to improve your credit. They will suggest you pay off collections and liens, but other suggestions may be simpler requests like removing one person from a certain tradeline as authorized user, or paying down some credit lines to under 50% of the limit. (Most folks dont know this, but when you go over 50% of your limit on your balance, it hurts your credit scores. Maxed out cards will put many folks with perfect pay histories into the 600s!)

Work with a lender who offers this service for free. That way they have skin in the game. Their payment will be your business and loyalty. Hence, your best interests will be theirs too. Search around on google using terms like “mortgage lender credit coach repair counseling, etc… good luck.

Answered about 1 year ago

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