There are many ways to get a mortgage. Some benefit borrowers with large down payments, some benefit those with less to put down; some benefit borrowers who plan to be in the home for less than 7 years, some benefit borrowers who plan to be there for 30 years; some benefit borrowers with good credit, and some are designed for those with not-so-great credit. So when attempting to buy a house with bad credit, the first step is to determine what “bad credit” really is.

I’ve met borrowers here in Michigan with 750+ FICO scores and perfect trade lines who have asked if they could credit qualify because they thought they had bad credit. I’ve met others who have told me they have great credit who actually have a FICO in the 500’s with multiple collections on their credit. So for the record, when talking FICO scores, 680-720 is generally the cutoff for standard underwriting with no rate exceptions; anything below that and you begin to see rates increase. 660 FICO and below is where you officially hit the “bad credit” category, as that is where certain lenders will not lend to you, certain loan programs are not available to you, and exceptions may be needed to get your loan approved.

That being said, we approve mortgages all the time for borrowers with FICO scores below a 660. It is simply a matter of understanding the lenders who will lend in this space and the loan programs which make sense. The best option is a VA loan. The VA does not set a minimum FICO requirement, so I can get loans approved this way that would otherwise never be approved. I simply need to find a lender who is willing to underwrite the loan.

If VA is not an option because you are not a veteran or active-duty service member, the next option is FHA. FHA does not adjust your rate based upon credit; if you can qualify, you get the standard pricing. So if you have bad credit, you need to find a FHA lender who can approve you. And if there is simply no one out there who will do it, you need to find a mortgage professional who can guide you in the ways to repair your credit enough to qualify.

If you do have questions about credit and mortgage financing, please feel free to contact me. And if you have anything to add about buying a house with bad credit, please leave a comment.