Just wondering. Asking for a friend.
They use to have a 800+ credit score 16 years ago but little by little went down to 550ish.
Want a house.
Maryland area around 400k; have a little whittle bit of money saved up.
How can one realistically get a house with a bad credit rating in the 500s?
byu/NakedIanMalcolm inRealEstate
Posted by NakedIanMalcolm
17 Comments
Fix it.
Probably can’t. Not because of the 550 score, but because of what is causing the 550 credit score.
How does it go down little by little over the years? It basically only drops dramatically when you make a mistake and increases slowly.
A couple of things they should do, spend money to increase the credit score, and also get a huge down payment, like 25%+.
Look into FHA. Credit rules just adjusted.
Realistically? Rent to own or seller financing and that’s hard to find if not close to impossible.
Buy a house seller financing, I’ve done 2, no credit check
The lowest credit score needed to buy a house is typically 500 for an FHA loan with a 10% down payment. For conventional loans, a minimum of 620 is generally required. While some government-backed loans have very low requirements, most lenders impose their own higher minimums, often requiring at least 580 to 620. Just keep in mind, lower credit scores will result in higher interest rates so that needs to also be considered.
Saving up some money is a good sign. Presumably you addressed whatever tanked your credit there
Credit will improve with time if you make at least the minimum payments going forward.
Your credit score can improve a lot if you get your credit utilization down. This happens right away. And if you pay your statement balance every month you save a ton on interest and keep your utilization down.
Talk to a mortgage lender about the specifics. An FHA loan can be a good option at 620, sometimes 600 credit score. That isn’t far off from 550.
Cash 💰
I mean you could do private notes, but the most likely option is to inherit it, or marry someone with good credit
They probably can’t without coming up with enough for a cash purchase.
Not everyone will be able to buy their home. This is a good thing.
If anyone with any credit history could buy, housing prices would skyrocket and then mass foreclosures would follow.
How do I know this? It happened, about twenty years ago.
Squatters rights ftw.
FHA can do down to 500 with 10%. If they have a little bit of money, they would probably be better suited seeing what they can do to get to 580 and do 3.5% down.
Work with a broker that uses Orion, they have a DPA program down to 580.
Probably offer over asking price and request closing costs to be covered.
I don’t recommend this, as anything going wrong could happen and leave you financially unable to handle it. But realistically, it is possible.
Easy, just use all cash. 550 credit is hard money.
Money money moneyyyyyyyyyy
What about looking at tax deed sales/auctions. May not be the best situation but if they’ve got a down saved they could use that cash to bid/buy
owner finance is about it