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Buying A Home With Less-Than-Great Credit

By Elizabeth Elstien

Not every prospective homebuyer's credit score is stellar. While the interest rate is lower for those buyers with great credit, that doesn't leave those buyers whose credit score is below 620 standing on the sidewalk. There are ways to purchase a home with blemished credit. Read on to find out how to open the door to homeownership for those with less-than-great credit.


Money talks and a cash sale means that no loan is needed, which negates the need for a decent credit score. Rent for several years and save up funds, research different local Pennsylvanian organizations who can help with matching funds if you go through their program or borrow money from family to pay back with interest as you would a mortgage loan.


Get a relative or close friend with good credit to agree to co-sign a mortgage loan with you. The co-signer's high credit score should outweigh your poor credit score to get the loan approved, providing the co-signer is not already overly leveraged. Doing this may affect any other loans, such as car or second home, the co-signer may wish to acquire. If you don't pay the mortgage, the lender can come after the co-signer, who is equally responsible for the mortgage. Don't make the wrong impression on those who trust you; pay the mortgage on time.

Subprime Loans

These loans carry higher interest rates than conventional loans. Subprime loans are geared for those with poor credit scores or little credit history and include loans such as adjustable-rate mortgage (ARM), the most common type, which has an initial fixed rate and an adjustable rate after that. Beware, though, as aside from the higher interest rates, subprime loans may carry prepayment penalties or balloon payments. Ask the lender about these caveats before committing to any subprime loan.

Credit Repair

The best way to get a loan at a low interest rate is to repair your credit. Simple ways to do so include: (1) pay all bills on time, especially rent/mortgage payments which lenders view as important, (2) keep credit card balances low to raise your credit score, (3) avoid opening new credit cards, (4) open a credit card if you have none as showing good credit card management ups the credit score, (5) view your credit report and arrange with creditors to get delinquent or written off accounts paid fast.

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