Last updated: April 27, 2017

Can You Get a Home Loan with Bruised Credit?

Many people view home ownership as something that is out of reach, whether it’s due to their financial situation, their inability to afford a down payment, or their challenged credit score. But the truth is that home ownership can be a much more viable option than you might believe, even if you have bruised credit.

What is Bruised Credit?

Generally, if your FICO score is below 620, then you have bruised credit. Maybe you had a bill go to collections, or you forgot to make a car payment on time. Whatever the reason, your credit has some dings – but there is good news. A couple of bad credit hits isn’t the end of the world, and a credit score in the 500s doesn’t necessarily lock you out of homeownership.

Explore Your Government Options

There is a lingering belief that you need a large down payment before you can even approach a financial institution for a loan. People also believe that you must have good or excellent credit to obtain a mortgage and achieve homeowner status. But neither of these beliefs have to be true, thanks to a suite of government loan products.

Federal Housing Administration (FHA) Loans: If you have a bruised credit score, an FHA loan might be the best option for you. Instead of a 5%, 10%, or even 20% down payment, you often only need a down payment as little as 3.5% for an FHA loan, making it one of the easiest ways for potential home buyers to secure financing with bad credit.

Veteran Affairs (VA) Loans: If you have challenged credit and you’re a veteran of the U.S. military, then you’re already in the running for a VA loan. These loans are backed by the federal government, creating advantages such as lower interest rates and even zero down payment. However, most veterans pay funding fees, ranging from 1.25% to 3.3% of the home value amount for every $100,000 borrowed.

United States Department of Agriculture (USDA) Loans: This is a kind of mortgage program that requires zero down payment from eligible rural and suburban homebuyers. Not only that, it offers lower interest rates, no maximum loan amount, and it’s available from Pacific Union Financial to potential borrowers that have FICO scores below 600. Manufactured homes are also eligible, opening even more doors to homeownership for prospective buyers.

Custom Mortgage Solutions

As an alternative to going the government loan route, Pacific Union offers custom mortgage solutions to our borrowers, such as our FlexKey Loans. We offer FlexKey Restart for homeowners with bruised credit who are looking to refinance their home, but aren’t eligible for traditional home loans. There’s even a cash-out option if you’re trying to manage debt or looking to improve your home. We also offer our FlexKey Expanded loans to borrowers who are looking to purchase a home with bruised credit. We developed both of these mortgage options to reach more borrowers and open the door to homeownership and improvement.

You’re Not Alone

At the end of the day, the quickest and most reliable way to get an answer is to just contact us so we can help you figure it all out. Our team is equipped with the knowledge and expertise needed to help you get the home loan you need, even with less than perfect credit. Because that’s what matters; making sure you get into the home you want and deserve.