It is highly unlikely that you will be approved for a mortgage loan with bad credit and no money down. As of March 2011, people seeking to purchase foreclosed homes and other properties generally are expected to pay up to 20 percent down and have credit scores of 620 or higher.
Exceptions
It is possible to purchase a foreclosed home for less money down and for a credit score less than 620. In 2011 the Federal Home Administration was backing home loans for applicants with credit scores as low as 500 and down payments as low as 3.5 percent. Although FHA offers flexible standards, most lenders take conservative approaches to mortgage approval, mandating significant down payments and satisfactory credit scores.
Considerations
Requirements for purchasing a foreclosure are the same as qualifying for any other mortgage loan. You must have solid employment, income to support the anticipated mortgage payments and a credit report that shows a good payment history over the past 12 months to 24 months. Your report should be free of unpaid judgments charge-offs and collection accounts. Late payments on real estate loans in the past year will be closely scrutinized and could result in denial.
Rebuilding Credit
This may not be the right time for you to buy a house if you have bad credit and cannot afford a down payment. Instead, consider renting for two years or three years while making steady on-time payments on all your bills. Work hard to pay down debt while also saving for a down payment.
Workshops
Nonprofit credit counselors such as those affiliated with Consumer Credit Counseling Service often offer home-buying workshops. Attend a workshop in your area to learn more about credit requirements for purchasing a home and what to expect when applying for a mortgage. Find a credit counselor in your area by seeking a referral from a charity such as the United Way.
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