How to Get a Home Loan Without Great Credit

Written By Jeff Hindenach
Last updated January 29, 2021

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March 20, 2015

Simple. Thrifty. Living.

If you’re looking to obtain a home loan but your credit score is lower than you, or most lenders, would like, that doesn’t mean you have to forgo your dreams of homeownership. Instead, you just have to be willing to be persistent when it comes to looking for a mortgage. It’s true that it might take a little extra time and investigation, but in the end you’ll have the satisfaction of owning your own home. After all, where there’s a will, there’s a way.

Some banks are finally starting to relax their lending policies after the severe tightening that took place after the housing bust. Individuals with lower scores are being welcomed at larger banks because these institutions can afford to take a chance on consumers with less than perfect credit. If that’s you, a big bank might be your best bet. Don’t forget: It pays to ask questions when it comes to looking for a home mortgage. Be sure to search for local banks online in addition to checking out ones you are already familiar with. This strategy does take some time, but it can really pay off in the long run. Here is a good tool for shopping a bunch of lenders at once.

There are a multitude of charities out there that exist for the sole purpose of helping people with income or credit problems overcome the barriers to homeownership. Some of these organizations require borrowers to put in “sweat equity,” where you actually assist in building your own home. Others concentrate on getting your credit cleaned up. These organizations usually offer their services for free and are open to people in certain lower-income brackets, in order to make the possibility of ownership accessible to everyone. If you think that you fit the bill, you should certainly investigate these options.

Individuals with sub-prime credit scores may qualify for an FHA loan. These loans are for people who may not have great credit and also may not be able to put down a large downpayment. Many lenders offer FHA loans for first-time home buyers, so all you need to do is shop around. Here is a good place to do that.

Money talks and a larger down payment makes lenders less concerned about lending money to borrowers with sub-prime scores. If your down payment is large enough, you can overcome many issues with lenders. Those who are granting a loan absorb less financial risk when potential buyers are able to put a significant amount of money down. So having a large down payment could be the key to opening more doors for you when it comes to getting a loan for a home. Even if you have average credit, a large down payment may help you standout from other offers.

In most cases, as long as you’ve been at your job for one year or longer, lenders will be more likely to overlook credit issues. You just have to be prepared to offer a decent down payment and be willing to hunt for a broker willing to take a chance on your credit issues. If you are still having issues, you can look to one of the legitimate credit repair companies to help you raise your credit score.

The process isn’t necessarily hard, but it can be time consuming and stressful. At the end of the road, you’ll own your own home, and that makes it all worth it.

About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

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