Can I Buy a Home With Bad Credit?

Credit challenged borrowers are frequently surprised by how often the answer is yes. Fueled by rising home values and increasing competition, lenders have introduced loan products for borrowers in an astounding variety of credit and income situations. Prospective borrowers with credit issues may qualify for loans such as: 100% financing 1 day after a Chapter 7 bankruptcy discharge, buyouts of Chapter 13 bankruptcies and low score 100% loans. Some loans allow certain combinations of 30, 60 and 90 day lates on your previous mortgage. Others ignore collections subject to certain limits. Some borrowers who have received a Notice of Default may even qualify for a foreclosure bailout if they have enough equity in their home.

Naturally, the more significant your credit problems the more expensive your mortgage will be since the lender will need to compensate for their increased risk. Credit challenged borrowers frequently have hybrid mortgages which adjust after remaining fixed for 2 to 3 years. In many states they may have prepayment penalties on their mortgages.

FHA loans are an outstanding option for borrowers who have low or no credit scores, but a relatively clean recent history since they look at the credit history and not the score. They also allow borrowers to "build" credit history by less conventional means like utilitiy bill payment histories.

The types of loans offered and their requirements are constantly changing, so check with a lender you trust to see what your options are.