Finding a first time home buyer loan with bad credit

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Finding a first time home buyer loan with bad credit may not be that difficult of a task, even with bad credit. In fact, some financial institutions will finance your home with a FICO credit score lower then 620. However, the lower the credit score the higher the interest rate and down payment will be.


If your credit score is 620 or above, you may want to apply for a FHA loan. This type of loan is in place to help a person purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. FHA mortgage loans are currently available on 1-4 unit properties.

The Federal Housing Authority also has mortgage loans available for handyman specials and fixer uppers. HUD's 203(k) program can help you with this type of situation and allow you to purchase or refinance a property plus include in the loan the cost of making the repairs and improvements. The FHA insured 203(k) loan is provided through approved mortgage lenders nationwide. It is available to persons wanting to occupy the home. The down payment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.

When seeking a first time home buyer loan with bad credit or a fico score less then 620, it is probably best to avoid banks. Your best chance of getting approved for a first time home buyer loan with bad credit is to seek out a reputable mortgage broker. A mortgage broker is not a financial institution, but a qualified mortgage loan professional. They can run your credit report, and using the information about your current financial criteria, locate the appropriate financial institution with the best first time home buyer programs available for your needs.

Mortgage brokers charge fees for their services to find you a mortgage loan. This fee is only charged when your loan is closed and is added to your mortgage. When choosing a mortgage broker to get your first time home buyer loan with bad credit, you will want to be careful that they don't over charge you on fees. These fees can range from 3 to 7 percent of the home loan. If you want to negotiate these fees make sure you do so after you received the terms of your loan verbally to make sure that you are getting the best possible deal on interest rates and broker fees.