Credit challenged home seekers do have several options available when trying to obtain financing on a new home. The guidelines may be a bit more strict, and the rates might be slightly higher but many homeowners have been succesful with credit scores below 600. The key is finding banks that are willing to work with you.
The biggest factor in overcoming bad credit is a sufficient down payment. There is typically a three plus year waiting period after a short sale, foreclosure or bankruptcy- But clients with 10% down payment can reduce that waiting period down to one year.
Many people with bad credit are advised by credit repair companies to dispute the negative items on their credit reports. Banks will not finance you if you have “disputed” accounts. Any accounts that show up on your credit labeled as “In Dispute” must be cleared or settled before you can get approved for a new loan.
Tax Liens & Judgements
All liens need to be settled or in repayment- The repayment plan will count against your debt to income ratio.
Banks also like to see that you have made all of your credit card payments, rent, and car payments on time for at least 12 consecutive months.