If you have BAD credit it is unlikely you could be approved for mortgage financing at this time.
Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.
First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.
Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.
I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.
Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams.
The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.
The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.
There may be another loan option available to you, depending on the location of the property you are purchasing. USDA Guaranteed financing is a $0 down home loan program that is designed for low-to-moderate income families that can't obtain "traditional" financing (i.e. FHA, VA or Conventional). These loans actually offer 103% financing (the additional 3% is the funding fee associated with the loan). Another great advantage to this type of loan is that there is no MI (Mortgage Insurance) requirement! Minimum FICO score is 640. There are also no reserve requirements, but the DTI(Debt-to-Income) must remain below 43%. If you have a lot of debt, you could use the $10,000 to pay down your debt in order to reach the DTI requirement.
What's the catch? Here are some of the eligibility guidelines:
The property must be located in a "rural area" (usually a population of less than 20,000 people). To find out if the property you are purchasing is eligible for USDA Financing, visit this webpage: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11
There are also income limits for this type of loan. To find out if your income is eligible for this type of program, visit this webpage:... more
USDA (US dept of Agrigulture) and VA loans have 100% financing. However, FHA is the most popular program right now and this program requires 3.5% down. Remember, when you buy a home you may have to pay for miscellaneous items associatied with a home, any repairs, utilities, furniture, etc. If you don't have much money saved you may want to wait before you jump into owning. How is your credit? Do you have stable income? How much money do you have saved? What is your reason for wanting to put so little down? Consult a mortgage professional in order to find out if you are pre approved and for how much, etc. Good luck! Chad... more