How To Get a Home Loan With Bad Credit
Since the housing crash in 2008 sub-prime home mortgage loans all but vanished. Things have softened up in a major way since then so contact your CambridgeHomeLoan.com mortgage expert to help you find the best loan to fit your current situation. Regardless of what you hear, bad credit home loans are still possible.
Read below to better understand today’s loan options in the event you have bad credit in 2019.
FHA Home loans in 2019 allow for borrowers credit score to be a minimum score of 500 or higher to qualify. This has increased to 620 during Covid but this should just be temporary.

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Yes it is possible to get a home loan with bad credit. Read Below.
It is much easier today to qualify for an FHA Government Home Loan than for a conventional home loan due to the lenient credit requirements. The term “bad credit” home loans in many cases refers to what is called a “sub-prime” loan or FHA sub prime home loan. Let’s discuss how CambridgeHomeLoan.com can you you get approved despite having imperfect credit and what you need to know.
How To Get a Home Loan With Bad Credit
2018 FHA Credit Requirements Because FHA home loans are insured they are much less risky for lenders. They are able to lower their minimum requirements for a loan. No longer do you need to have a 620 credit score, people with poor credit can get approved. These “bad credit home loans” are known as a sub-prime mortgage. FHA loans allow for poor credit scores as low as 500 with 10% down and 580 score with 3.5% down.
Compensating Factors For Bad Credit
If you have a poor credit rating then you will need to show some compensating factors that help make up for it.
You will also need to show a financial hardship was the reason you fell behind on your monthly bills and you have since recovered and have re-established credit. You will want to explain this upfront.
Usually if you have poor credit your loan will go through manual underwriting. Giving correct infomation will help the underwriter help you get your loan approved.
If you have questions about your credit and qualifying
fill out the form to the left or feel free to call
800-826-5077
These compensating factors reduce the risk of the lender and increase your odds of getting approved with poor credit history.
- Large Down Payment (10% down or more)
- Low Debt to Income Ratio
- High Income
- Have A Cosigner Help
- No Outstanding Debt
- Large Amount Of Cash Reserves
- Significant Time With Current Employer
- Paying Comparable Rent Payment
VA Home Loan
If you’re a Veteran you may be eligible for a VA home loan. VA loans have many benefits, including no money down and no mortgage insurance. The VA does not have a minimum credit score requirement. However, most lenders will require a 620 or higher FICO score. Some VA lenders may be able to work with a 580 credit score in some situations.
USDA Rural Development Home Loan -(USDA Home Loan)
The U.S. Department of Agriculture created the USDA home loan program to encourage home ownership in rural areas of the country. These rural loans are specifically for low-to-moderate income families. When you think of the word “rural” you think of farms and open road. However, more than 90% of the country is in a USDA eligible location. Check the USDA map here. USDA home loans, like VA mortgages are a 100% financing home loan. Because there is no down payment, the credit score requirements for USDA mortgages is a little higher than FHA. Most lenders will require a 640 credit score to qualify for a USDA home loan. These Section 205 Direct Rural Loans are slightly more risky because they require no money down.
Home Improvement Loans FHA 203K Home Loan
For the buyer that is interested in getting a home that is need of repairs, or needs renovations there is the FHA 203(k) home loan. A 203k loan gives you the funds to buy the home plus gives you additional cash to make repairs. There are two types of FHA 203k loans, streamline and standard. A streamline 203k loan is a quick and easier loan process for basic cosmetic repairs. If the property needs major repairs such as plumbing or foundation then a standard 203k loan will be needed. The FHA 203k loan has the same requirements as an FHA loan, except they require a good credit score.
Typically you will need a 640 FICO score to qualify for a 203k loan. Fannie Mae HomeStyle Renovation Mortgage A HomeStyle renovation mortgage works similarly to a 203k loan. You are given the funds to purchase a home plus additional money to make repair or renovations. The benefit of this loan is that the loan for the home and rehab are combined into one money payment. You will not have a second mortgaged the terms are usually much more favorable than if you had to get a home equity loan.
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FHA Streamline Refinance Program
If you have an FHA loan you may qualify to refinance your home using this program. Streamline refinances do not require a credit check or income verification. FHA and VA streamline refinances are a great way for borrowers with a Government loan to refinance into a lower rate without perfect credit. Home Equity Loan and HELOC – A home-equity loan is where you use the equity in your home as collateral for a loan. It is also known as a second mortgage. With a HELOC you can tap into your equity with a line of credit that works similarly to a credit card. If you have bad credit then a home equity loan will be very difficult to qualify for. A cash-out refinance is easier to qualify for people with poor credit scores.
Pre-Approval Letter
Getting A Mortgage After A Bankruptcy, Short Sale Or Foreclosure
If you have gone through a bankruptcy, short sale, or been foreclosed on there is a 3 year waiting period you have to go though before you’re able to qualify for a Government home loan. There is a program called the FHA back to work program that shortens the waiting period to just 12 months to those who qualify. To be eligible for the program you’ll have to show you had an unforeseen financial hardship that caused the event that you must re-establish credit. You cannot have any late payments or collection accounts since the bankruptcy or foreclosure was dismissed.
Credit Scores
Your credit score represents the likelihood you will be 60 to 90 days late on a loan and are a greater risk to the lender. FICO, the credit scoring company used by mortgage lenders, grades your credit score ranging from;
Credit Score of 720 and higher
Very Good Credit Score
Credit Score of 680 to 719
Good Credit Score
Credit Score of 580 to 639
Poor Score
Credit Score of 579 or lower
Bad Score
Before trying to get a home loan with bad credit you should work on getting your score as high as it can be. The higher your score the better odds you have of getting approved for a mortgage. If you have a significant amount of negative accounts you should use our free DIY credit repair guide. If you have a lot of debt then a debt consolidation program may be a good option to help you pay off your debt quicker and at a lower interest rate.
Tips To Raising Your Credit Score For A Home Loan
Follow these steps to help raise your credit score:
Payoff the balances on your credit cards
Do not miss any credit card or loan payments
Do not have too many credit inquiries
Dispute negative information
Contact creditors to delete collection accounts if you pay them

Should I Wait Until My Credit Score Increases
If you are debating whether or not you should apply for a home loan now, or wait until you have a higher FICO score, there are a few things to consider.
Home prices are on the rise, so the longer you wait the more you’re going to pay and the higher your monthly payment will be. Interest rates are still at historical lows, if you are able to get a mortgage, you probably should. The rate you get with bad credit will have a higher interest rate, however that rate may still be lower than the rate you would receive as rates increase.
Remember, Not all mortgage companies, with CambridgeHomeLoan.com you will have a lender that can not only provide the best loan and rates but has access to programs others don’t. If we cannot get it done, it most likely can’t get done.
Refinance and Expert Mortgage Loan Advice

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