There are many people out there who want to get started in real estate, but have poor credit and let it become a roadblock. There are still ways to buy a home with poor credit and I’d like to talk about a few.
Three Ways to Buy a House With Poor Credit
1.) FHA Loans
Yes, that is right. I said FHA loans. Believe it or not to qualify for a 3.5% down FHA loan the minimum credit score is 580, which is basically the Mendoza line for poor credit.
If a person’s score is below that they still have a legitimate shot to qualify, but the downpayment amount goes up to 10%.
Obviously the better the credit score the easier it is to get a loan. So doing a little credit repair ahead of time isn’t a bad idea, but as you can see there is an option if you don’t have a 600+ credit score.
2.) Seller Financing
I’m still not sure why this seems so foreign to people. A bank securing a loan for you to purchase a property is functionally no different than the seller holding a note on the property.
It is mainly finding a seller that is interested in doing this that owns their property outright.
For those new to the term, selling financing is when the owner sells you the property and let’s you pay in installments. They basically hold a note. You give them a downpayment and make monthly payments over the duration of the loan, just like you would to a bank.
Best part is that it’s all negotiable by you and the seller, thus there is no set credit score required. Rate, duration, downpayment, is all negotiable too.
3.) Partner up with someone
There are alot of people with good time consuming jobs that have the credit to buy a home, but do not have the time to manage a renovation or a rental.
If you have poor credit and are able to put in “sweat equity” you very well may be a great match. Generally most partnerships thrive when two parties bring something of different value to the table.
I have a partner out of state that I do exactly this with. He has the ability to oversee the renovation and do some of the work while I secure the financing and handle all the paperwork and financials.
Heading local investor meetups is a great way to network and find someone to partner with. Tapping your existing network as well; people who have that busy day job but want to invest in real estate may be the right partner for you.
So there it is – some options to get around the poor credit roadblock. That’s all it is in the end, a roadblock and we all have them. Whether it’s time, money, experience or poor credit you cannot let it block your path.