How to buy a house with a low credit rating

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A high credit rating can allow you to buy your dream home, but sometimes a single financial error can spoil a credit rating, even if you are a responsible and reliable borrower, since a huge number of factors are taken into account in its formation.

But with a low credit rating you can buy your dream home, for this there are several ways that the publication has collected Trulia.

1. Larger down payment

For people with a credit score below 580, a large down payment is not an option, but a necessity. Offering a large down payment (20% of the home's price or more) can make up for the lack of points in the rating.

A large down payment signals the lender about your ability to repay the loan, despite the imperfect credit history, which has a positive effect on the cost of the loan.

2. Get a loan through the Federal Housing Administration (FHA)

The FHA housing loan program has softer requirements, since it is designed for a middle and low income borrower, who often have a not very good credit history. Such a loan requires a rating of at least 580 points and a first installment in 3,5% of the value of the house, and there may be a fairly high cost of credit.

3. Pay attention to your strengths lender

Automatically, borrowers inform the lender of their credit rating, but if it is below the required minimum for obtaining a loan, you can confirm your financial stability and solvency in other ways.

For example, show him your rent bills for the last year or six months that were paid on time, or a statement showing you have savings. Also, be prepared to explain why your credit score is so low, since it isn't always a sign of financial irresponsibility—a decline could be the result of a large student or medical loan.

4. Use a private loan

Banks or credit unions are a more reliable way to borrow. But if your credit rating does not allow this, you can take out a private loan - from acquaintances, relatives, friends or a private lender. Although such operations are less profitable: higher interest rates and the risk of ruining relationships with friends or acquaintances, your bad credit history plays absolutely no role here.

Read also on ForumDaily:

8 ways to get a loan with a bad credit history

How to a beginner to achieve a credit rating of 750 points and more

How do credit unions in the USA differ from banks?

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