Buying Your First Home With Bad Credit and Low Credit Scores

This guide covers buying your first home with bad credit and low credit scores. Buying your first home for the first time can be very exciting. However, the mortgage process is complex. The whole mortgage industry went through a major overhaul of the markets after the Great Recession of 2008. There was not any county in the United States that was not affected by the real estate and mortgage collapse of 2008. Home values in the entire U.S. plummeted. Many homeowners thought that they would never be able to sell their homes due to having underwater mortgages.

Eventually, the housing market recovered and, prices of homes eventually have skyrocketed and the housing market remains stronger than ever with no sign of a slow down.

Since everything is a new experience, the wrong decision of buying your first home shopping process can cost lots of money and create a living nightmare. We have a large variety of first time home buyers down payment programs and resources to help our borrowers make the right choices. In the following paragraphs, we will cover buying your first home with bad credit and low credit scores.

Buying Your First Home With Bad Credit for First Time Homebuyers

Buying your first home and our first time home buyer program assistance was created and structured to give you the confidence and knowledge to attain your buying your first home goals with minimal problems while saving you money. Future home buyers will receive a 1 one 1 session with one of our Alabama licensed loan consultants who will answer any questions. Dale Elenteny, a senior mortgage loan originator at Gustan Cho Associates says the following about buying your first home with bad credit and low credit scores:

Our experienced loan officers at Gustan Cho Associates offers a variety of the different types of mortgage programs out there that best suits a home buyer’s needs and goals.

This program was designed to promote homeownership in our local Florida, Illinois, California, Kansas, Alabama, and other markets in the United States through our network of licensed mortgage loan originators. It is offered at no cost or obligation and homebuyers can choose any lender of their choice and does not need to be obligated to use us.

Buying Your First Home With Bad Credit and Low Credit Scores

Buying your first home is a huge achievement. Don’t let a low credit score stop you! A home can still be purchased even if your credit score isn’t great. At Gustan Cho Associates, we guide first-time buyers who are turned away by banks and credit unions every day.

• A 580 score?
• Past collection accounts?
• Not enough credit history?
• There are mortgage programs for every situation.

This guide will teach you how to buy a house with bad credit. You will explore the right loan options and find tips to boost your approval chances. Soon, you will walk through the door of your new home, even when your credit score is still a work in progress.

Can You Buy a House With Bad Credit? Yes, Here’s How

You can buy a house with bad credit. Many first-time homebuyers hear “bad credit” and assume the dream of homeownership is gone, but that’s a myth. Most big banks look for a credit score of 700 or higher. However, other lenders—such as Gustan Cho Associates—specialize in flexible loans open to folks in your situation.

Gustan Cho Associates Says YES When Others Say NO

The team at Gustan Cho Associates helps borrowers with credit scores starting at 500 under HUD guidelines. Sometimes, we even lower them through some non-QM loan options. John Strange, a senior mortgage loan originator at Gustan Cho Associates says the following about buying your first home with bad credit and low credit scores.

You don’t have to put off buying your first home for years while trying to boost your credit. You just need a mortgage lender who says “yes” when other lenders won’t.

Over 80% of our borrowers at Gustan Cho Associates are folks denied at other mortgage companies. Gustan Cho Associates has a national reputation of saying YES to mortgage loan approvals when others say NO.  First-time homebuyer with bad credit? No worries! Our tips show you can qualify fast for a mortgage. Let Gustan Cho Associates help you today.

What is Considered Bad Credit When Buying Your First Home?

“Bad credit” usually means a FICO score under 620, yet lenders can have varying cutoffs. Here’s a quick guide on what each score range means:

• 740 Plus = Excellent
• 700–739 = Good
• 620–699 = Fair
• Below 620 = Bad
• 500–579 = Poor but still FHA-eligible
• Below 500 = Non-traditional options or plans to rebuild

Remember, a credit score is just one piece. Your income, debt-to-income ratio, job history, and how you pay your bills are also important. At Gustan Cho Associates, we review your financial situation, not just the score.

Best Home Loan Options for First-Time Buyers With Bad Credit

Several mortgage programs can help first-time buyers with credit scores on the lower side. Check out these popular options:

FHA Loans – Credit Scores Starting at 500

The FHA loan is the most common choice for buyers with weak credit. If your score is 580 or higher, you can put down just 3.5%. If your score is between 500 and 579, the down payment goes up to 10%. You’ll pay more upfront, but you can still make it work.

VA Loans – No Hard Credit Score Limit

• Veterans, active-duty military, and eligible surviving spouses can apply for VA loans that cover the full purchase price with zero down.
• There’s no official minimum credit score, though most lenders look for 580 to 620.
• Some lenders let us work with no extra credit score rules at all.

USDA Loans – Perfect for Country and Some Suburban Homes

USDA loans require no down payment and are meant for homes in approved rural or suburban areas. The minimum score is 640, but some lenders may allow lower scores if you can show other strengths, like good income or savings.

Non-QM Loans – Flexibility for Tough Credit Situations

Non-Qualified Mortgage (Non-QM) loans are great if you’ve had recent credit problems, are self-employed, or don’t have a solid credit history. Instead of the usual credit score check, these programs can look at bank statements or other documents to prove you can pay.

How to Strengthen Your Mortgage Application When You Have Bad Credit

A low credit score doesn’t mean homeownership is out of reach.

You can boost your application by taking these steps:

• Reduce your credit card balances – Aim for under 30% of your credit limit to improve your score.
• Set up automatic bill payments.
• Missing a single payment can drop your score.
• Check your credit report for mistakes.
• Correct errors online for a quick score increase.
• Stack up a bigger down payment.
• Putting down 10% to 20% helps offset credit issues.
• Bring in a co-signer.
• A relative with better credit can improve your chances of getting approved.

These actions are like adding a brick to your credit wall. Over time, they create a solid foundation for your mortgage.

Why Gustan Cho Associates is the Right Choice for First-Time Buyers with Bad Credit

Many lenders pile on extra “overlays” that can turn away borrowers with low scores. At Gustan Cho Associates, we don’t have extra rules on FHA, VA, USDA, or Conventional loans. If you hit the standards HUD or Fannie Mae set, we’re in your corner—ready to help, no matter how many other lenders have said no.

We have plenty of non-QM loan options for anybody ready to buy now. Check them out:

• Bank statement loans work great for self-employed borrowers.
• Asset-based loans let you use savings or other assets instead of income.
• Investors love our DSCR (Debt Service Coverage Ratio) loans, focusing only on rent income.
• ITIN loans let foreign nationals buy homes without a Social Security number.
• P&L-only low-doc loans ask for just profit-and-loss statements for income verification.
• We close fast and have flexible guidelines, so we’re your lender of second chances.

Simple Steps to Buy Your First Home with Bad Credit

Ready to move? Follow this easy action plan:

• Get pre-approved: Find out what you can afford.
• Check your credit report: Look for errors to fix and areas to improve.
• Speak to a loan officer who knows low-credit options.
• Pick the best loan choice—FHA, VA, USDA, or a non-QM loan.

Then you can start house hunting with confidence. Homeownership is closer than you think.

Common Myths About Buying Your First Home with Low Credit

Let’s clear up some myths that keep first-time buyers on the sidelines:

• Myth: You need a 700+ credit score to get a mortgage.
• Truth: FHA and VA loans let scores go as low as 500 with the right lender.
• Myth: Bad credit means you’ll get denied for a mortgage.
• Truth: Many lenders will look at low scores if you show strong compensating factors.
• Myth: You must have 20 percent saved up for a down payment.
• Truth: FHA loans let you buy with just 3.5 percent down, and VA and USDA loans can get you in with zero down.
• Myth: You have to sit and wait for years to get financed.
• Truth: You can get pre-approved now with the right mortgage plan and lender.

Tips to Rebuild Credit While Shopping for Your First House

You can get your credit in shape and look for a home simultaneously.

Here’s the plan:

• Open a secured credit card and keep the balance under 30 percent.
• Ask a trusted relative to add you to a credit card where they have a perfect payment history.
• Don’t apply for any new credit while you’re under mortgage review.
• Keep older accounts open because a longer credit history can bump your score.
• Set up auto-pay on loans and credit cards to never miss a payment.

Buying Your First Home With Collections or Charge-Offs

You can still get a mortgage if you have collections, charge-offs, or late payments. FHA loans don’t require collections to be paid off unless they’re for government loans or add up to more than $2,000. In those cases, special rules kick in. We’ll recommend whether to pay off a debt now or let it sit to keep your score higher. Charge-offs and old medical bills usually won’t prevent your mortgage approval. Our underwriting team can review your information quickly and show you the best path forward.

Buying Your First Home: You’re Closer Than You Think

You can buy your first home even with bad credit. Don’t let your score keep you from the wealth and security homeownership can bring. With the right advice, flexible loan programs, and a lender understanding second chances, you can soon step into your dream home.

At Gustan Cho Associates, we help borrowers with credit struggles become proud homeowners. We fund deals that other lenders turn down. Contact us today, and we’ll show you how.

Ready To Take the First Step to Buying Your First Home?

Call us at (800) 900-8569 or go to gustancho.com to get your pre-approval now. We’re here to support you—no extra rules, just results.

Most Common First Time Home Buyer FAQ

The following are some examples of what first time home buyers will learn:

• Can you afford to buy your first home?
• Is homeownership the right thing for you at this time?
• How to overcome credit problems and the impact a low score can cost you

Maybe repairing your credit and waiting until your credit scores have improved might be a wise choice. This may save you thousands of dollars if you have sub-standard credit scores. A specialist will assist you with that

• How to buy your first home with $0 down?
• Do you qualify for down payment assistance or other state or federal programs?
• What’s the difference between FHA, Conventional, Jumbo, and other mortgage loans?
• What type of mortgage is best for you: 15 year-fixed, 30 year-fixed, or an ARM?
• How to know if you are getting a good deal on your mortgage and the costs associated with obtaining the mortgage?
• The pros and cons of using a buyer’s real estate agent?
• Should you use one?
• How to know if you have REALLY found the right home?

Homebuyers in Alabama who need to start the qualification process, click on GET PRE-APPROVED NOW : The team at Gustan Cho Associates and it licensed loan officers is available 7 days a week, including holidays to answer all of your questions and go over case scenarios.

FAQs for First-Time Homebuyers at Gustan Cho Associates

How Do I Know if I Can Afford My First Home?

Being able to afford a home goes beyond the sticker price. Besides the mortgage payment, think about property taxes, homeowners’ insurance, any homeowners association (HOA) fees, and maintenance costs. Gustan Cho Associates will guide you through a full financial snapshot and set a realistic budget for your home purchase. Before you start touring homes, our loan officers will crunch the numbers together so you know the price range that fits your monthly budget.

Is Homeownership the Right Choice for You Right Now?

Buying a home gives you more security and a place to call your own, but it also means taking on some big duties. The timing might be right if you know you’ll be in the same area for at least three years and your budget looks healthy. Together, we’ll look at homeownership’s good and the tricky sides to see how it aligns with your dreams, lifestyle, and income.

How Can I Fix Credit Problems and See What Bad Credit Really Costs?

Low credit scores can push up your mortgage rate, leading you to pay more interest. Still, your scores won’t keep you from becoming a homeowner. At Gustan Cho Associates, we’re here to help buyers with these bumps in the road. We’ll check your credit, create steps to boost it, and connect you to loan options that make sense, even if your credit needs work.

Should I Wait to Buy Until My Credit Is Better?

Sometimes it makes sense to wait. Raising your credit score by even a few points could mean a lower interest rate, which cuts your monthly payment and saves you money over the life of the loan. That’s why our credit experts on our team guide you at no cost. They’ll help you weigh the pros and cons of waiting against your current buying power, so you’ll know if it’s smarter to hold off or if you’re already ready to move forward.

How Can I Buy My First Home With $0 Down?

You can buy a house with zero down. VA loans help veterans and active-duty military folks, while USDA loans are perfect for rural buyers. Both programs sometimes let you skip the down payment and mortgage insurance. If you think you might be eligible, reach out today and let us help you enter your new home without any upfront cash.

Do I Qualify for Down Payment Assistance or Government Programs?

Counties and states often roll out down payment assistance (DPA) programs and first-time homebuyer grants. Some will even forgive the loan after a few years, help with closing costs, or give you tax breaks. Our team at Gustan Cho Associates closely monitors every local program and knows which ones fit your situation. We’ll help you sign up so you can save big at closing.

What’s the Difference Between FHA, Conventional, Jumbo, and Other Mortgage Loans?

Different loan types fit different buyers:

• FHA loans: Awesome for folks with a lower credit score or who can’t scrape together much cash.
• Conventional loans: Need a stronger credit score, but might save you money over time.
• Jumbo loans: For pricier homes that cost more than the standard loan limit, great for luxury markets.
• VA and USDA loans: No down payment loans are available for those who qualify.
• Non-QM loans: Designed for self-employed workers, ITIN borrowers, or anyone with non-traditional credit.

Our team will break down each choice in plain language and help you find the one that fits you best.

Which Mortgage Type Should I Choose: 15-Year Fixed, 30-Year Fixed, or ARM?

• 30-year fixed-rate loans are the most common—monthly payments are lower, and the payment stays the same forever.
• 15-year fixed-rate loans save a lot on interest, but the payments are higher each month.
• Adjustable-rate mortgages (ARMs) start with lower rates, but the rate can go up after a few years.

We will help you weigh each choice by considering your goals, income, and the time you plan to live in the home.

How Can I Tell If I’m Getting a Good Mortgage?

A Good Mortgage Deal Includes:

• A low interest rate.
• Fair fees and closing costs.
• No extra layers of lender rules.
• Clear answers on every cost and term.

At Gustan Cho Associates, we compare over 200 wholesale mortgage lenders to get you the best rates and fewest fees, without extra rules. We will review every cost so you understand exactly what you pay and why.

Should I Work with a Real Estate Agent? Here Are the Ups and Downs

• Especially if it’s your first home.
• Partnering with a buyer’s agent makes the process easier and safer.

Here’s the breakdown:

Pros

• They look out for you, not the seller.
• They negotiate the price and even follow up on repairs.
• They keep the paperwork and deadlines organized.
• Their help typically doesn’t cost you anything. The seller pays the fee.

Cons

• Some agents push you to make fast decisions.
• You need one who listens and understands your goals.

We can connect you with patient, buyer-focused agents near you. They’ll team up with your loan officer and never rush you.

How Do I Know I’ve Found the Right House?

When you step inside and feel like it’s home, your gut sends a strong signal. Still, check off a few practical boxes:

• It’s within your budget.
• The location works for your job, school, and how you like to live.
• The condition is solid after a home inspection.
• You can picture yourself there for years.

Take your time. Our team will get you fully pre-approved, so when you discover “the one,” you can make a confident, strong offer fast.

Ready to Buy Your First Home? Let’s Get Started

At Gustan Cho Associates, we know how to help first-time buyers become homeowners, especially people with imperfect credit, savings that aren’t quite enough, or those who have been turned down. It doesn’t matter if you’re only thinking about buying or if you’ve found the one you want. Our friendly experts will walk you through every part of the process without extra fees or high-pressure sales.

Give us a call at (800) 900-8569 or drop by Gustan Cho Associates to take your first step toward homeownership today.

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