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How to Buy a Home When You Have Bad Credit in New York

Founding Member of Moshes Law, P.C.
During his years of practice, Yuriy has concentrated in litigation and real estate transactions as his areas of expertise.

buying a home with bad credit

Living paycheck to paycheck and being saddled with debt, owning your own home might seem out of reach.  But you don’t need perfect, or even good credit, to pursue the American dream.  There are ways to qualify for home-buying, and a good attorney can help you get your dream home. 

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What is The Lowest Credit Score to Buy a House?

Credit scores are the starting point of determining a person’s credit worthiness.  A credit score can range anywhere from 300 to 850.  A person could qualify for a loan with a credit score between 500 and 579.  But these loans are limited to Federal Housing Administration (FHA) loans, and you’ll need to pay off any outstanding collections and pony up at least ten percent of the total cost of the property for a down payment.  A credit score between 580 and 620 might get you an VA loan or FHA loan with a down payment as low as between three and four percent.  A credit score up to 699 increases your chances of obtaining a conventional loan, with a credit score of 700 and greater (particularly 740 and more) will get you a loan with the lowest interest rates.

Ways to Improve Your Credit Score

Many people lost their homes and gainful employment because of the economic crises fueled by the COVID-19 pandemic.  Mortgage lenders are pickier about who they lend to as a result.  This can price many potential buyers out of a home, just when they may be getting back on their feet but also need to find a new place to live as they rebuild their lives.  They either don’t qualify for a home loan, or qualify for a loan with an exorbitant interest rate, because of their less than stellar credit rating.  One of the best ways to buy a house with bad credit is to work on improving your credit score.  We explore some of the easiest ways to improve your score below.  

Review Your Credit Report

One of the first, and the easiest, steps to improving your credit is to pull a copy of your credit report.  Your credit report can help you see what your credit score is and where you may have outstanding debts to address.  There are several places where you can obtain a complete copy of your credit report for free without signing up for credit monitoring services as a condition of getting the free report.   You can ask your local financial institution.  You can also get a report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) through the only government approved credit website.

Once you get your credit report, review it for any anomalies and errors.  Look for accounts and anything that doesn’t reflect your actual credit history including anything you recognize doesn’t belong to you regarding personally identifiable information.  Also review your credit report for any outstanding debts you may have.  Any errors and debts that are in error can be disputed with the three credit bureaus.  Any legitimate debts can then be addressed accordingly.

Reduce Your Debt

One of the biggest items lenders consider is the amount of debt you carry in relation to your income, especially unsecured debt like credit cards.  The lower your debt to income ratio is (the less debt you carry compared to what you earn), the greater the chance of getting a favorable loan with a lower interest rate.

Get Collection Accounts Removed

You can start cleaning up your credit history by getting collection accounts removed from your credit reports.  One of the ways to do that is to negotiate and make arrangements to pay off outstanding debts and collections to get them removed from your rating.  These types of negotiations are one reason why you would benefit from the help of an experienced home loan attorney like those with Moshes Law Offices.  Contact our office today for a free consultation.

Get Added as an Authorized User on Someone Else’s Credit Card

Overuse of credit cards is not the only reason you may have a low credit rating.  Many prospective, first-time buyers have never had a credit card.  Used responsibly, a credit card can be an easy way to start building good credit.  If you can’t qualify for a card yourself, you can be added as an authorized user on someone else’s credit card.  This can help you build good credit, especially if the person whose card you are listed on has good or excellent credit themselves.

Make More Than the Minimum Payment Required

Making more than the minimum amount owed each month on your credit cards can help your credit.  The amount of credit you use versus your credit card balance accounts for about 30% of your total credit score.  The more you can reduce that ratio, the better your credit will be.


Is buying a home possible with bad credit?

The higher your credit is, the better your chances of securing a favorable home loan.  But it is still possible to get a home loan with less than stellar credit.  FHA home loans carry a minimum requirement of a credit score of 500 and a down payment of ten percent.

Does bad credit matter if you can make a huge down payment?

It might seem logical that a larger down payment would negate the effects of a bad credit rating.  However, poor credit would still matter in how much interest you pay on a loan, even if you have a large down payment ready to go.  But a larger down payment can help a bit.  Most New York lenders require a minimum 20% down, so the more you can put down, the more you might look attractive to lenders who might be willing to work with you.

Can you buy a home if you don’t have credit at all?

Many first-time buyers don’t have an established credit history (through credit cards, car payments, etc.).  But options like signing as a co-borrower with a person who has a good credit score, can help your chances of getting a favorable loan.

Can you buy a home if you have lots of student loan debt?

Student loan debt is just like any other debt when it comes to lenders looking at your total debt to income ratio.  Most lenders want to see a DTI ratio of around 43% or less.

Need Help When Buying a Home with Bad Credit?

There are a lot of things to consider when buying a home. It seems hard to find where to start to buy a house with bad credit. 

A good home loan attorney like the team at the Law Offices of Yuriy Moshes will help evaluate your credit report and score and where and what you need to work on to improve your chances of realizing the American dream of home ownership.  Fill out our form for a free consultation.

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