Home Loans with Bad Credit Score

Bad credit home loans are known as subprime mortgages and there is a number of lenders in the mortgage market who are willing to provide you a home loan even if your credit score is lower than 640.



How Home Loans Work?

When you apply for a home loan to purchase your dream house, lenders check your credit report, verify your income, review your tax returns and bank statements to decide whether you qualify for a home loan. Requirements of mortgage loans differ among lenders and that makes receiving a home loan possible despite of your bad credit score. But, the interest rate you will be charged can be higher than normal. Also, you will be required to make a higher down payment compared to standard mortgage loans.

How To Increase Your Chance Of Getting Approved For A Bad Credit Home Loan?

There are several ways to reduce the risk to the lender and to get mortgage loan you need, despite of your damaged credit report.


  • You can make a large down payment. If you do not have enough money to put down a deposit, you may consider applying for a combination mortgage which allows you to borrow two loans at a time for both the down payment and the value of your house.
  • You should lower your debt-to-income ratio.
  • You should earn a high income and have a full-time job.
  • You should not have any outstanding debt.
  • You should have a large amount of cash reserves and savings.

How To Build Up My Credit Score?

Since you will be charged higher interest rates and will be required to put down a higher deposit due to your damaged credit score, you may want to work on your credit score before applying for a mortgage loan to get the best deals. There are several ways to improve your credit score:

  • You can get a credit builder credit card which allows you to build up your credit record as you make on time payments.
  • Pay off your current debts and balances on your credit cards.
  • Do not miss any payment.
  • Avoid credit inquiries.
  • Avoid applying for new loans before paying off the previous ones.
  • Ask creditors to clean up your collection accounts when you repay them.
  • Check your credit report to correct possible errors.