Obtaining a mortgage or other home loan with bad credit can be challenging. Banks are often hesitant to lend to people with past bankruptcies, foreclosures, or a very high debt-to-income ratio. All of these factors severely impact your credit score. Fortunately, there are ways to get home loans with bad credit in California. If you want a loan but aren’t sure what to do, check out the following three tips to help you secure the home loan you want at a price you can afford.
CalHFA: Your Experts In Home Loans With Bad Credit In California
CalHFA (California Housing Finance Agency) is a state office dedicated to helping homeowners find affordable housing loans. They have various programs that are designed to help would-be homeowners with bad credit throughout the state. CalHFA has loan officers on staff that can assist with different options. They offer FHA, VA, and conventional mortgages.
CalHFA also has a program that can provide up to 3.5% of the house as a deferred junior loan, which needn’t be paid back until the mortgage is fully paid off. FHA loans are available to homebuyers with a credit score as low as 500 and require a minimum of 3.5% as down payment (scores between 500 and 580 require 10%). CalHFA can provide this amount as the junior loan. Therefore, combining CalHFA with an FHA loan can allow a person with bad credit in California to qualify for the home they want.
Whether you are looking at refinancing or getting your first mortgage with bad credit in California, your first step should be to contact CalHFA. There is a good chance that they can assist you!
Consider FHA Loans From A Conventional Bank
Even if you don’t want to go through CalHFA to get extra assistance, do not ignore FHA loans from a bank. Remember that friends, relatives, your employer, anyone can gift you the down payment to use with an FHA loan. As long as you have a credit score above 580, you would only need to provide 3.5% down to secure a mortgage. If you have a credit score between 500 and 580, use an online credit score modeling tool to see what it would take to get you up to 580. Boosting your score a few points and then taking advantage of an FHA loan may be the most straightforward path to securing the home of your dreams!
Served In The Military? There Are VA Options For You!
If you have served in the military, there are VA home loans that have forgiving standards. VA loans are incredible in that they often have reasonable interest rates, require little-to-no money, and have no PMI payments. Credit scores do have to be at least 620. If you have a score that exceeds 620 or you think you can improve your score to that level, a VA loan is worth considering.
Do not be dissuaded from homeownership just because you have a bad credit score. There are multiple ways to get the home of your dreams! Talk to CalHFA and also look into FHA-backed loans. These are the options that most people seeking home loans with bad credit in California will find most appealing. Of course, if you have served in the military, a VA loan is an option you must consider as well. Homeownership is possible with bad credit. Look into all the avenues, discuss with the right loan officers, and land on a path forward that is right for you!