Four Tips on How to Buy a House with Bad Credit

Every day, in all parts of the country, there are people attempting to buy a house with poor, and sometimes, bad credit history. And like all of the other home buyers doing battle in the highly competitive real estate market, these people are trying to perform a balancing act of finding the right home and finding out how to get approved for a home mortgage loan.

This process can be tricky—especially if your credit is in rough shape. Home buyers with bad credit must overcome certain challenges when trying to qualify for a mortgage. It’s also not rare for a first time home buyer with bad credit to get declined for a mortgage either.

If your credit is suffering, use the 4 tips below to learn how you can take advantage of the many resources available to home buyers and triage your credit to ensure your home mortgage loan application gets approved once you find the perfect home.

How to Find and Buy a House with Bad Credit

Create a List

The first thing you should do is build a list of homes you like and could potentially see yourself buying. The reason you shouldn’t settle on just one house is that your lack of credit worthiness may prevent you from purchasing the house of your dreams. While it’s still important to keep your dream house on your list, be sure to include other options as well. Good sources for affordable home options include:

  • A local realtor should have great insight on all of the deals available on the marketplace. Ask friends, family, coworkers and colleagues for referrals.
  • The U.S. Department of Housing and Urban Development (HUD)also features homes for sale that have been foreclosed on at market value.
  • Your State Housing Authority will often offer access to property listings.
  • Board of Realtors,like the Kansas Board of Realtors, can serve as a great starting point to find area experts with knowledge of the local real estate market.

Build Up a War Chest

This very important step can actually be tackled in concert with your search for a new home. Saving can, and should be done at every point in your home search. Saving for a down payment is important because it:

  • Satisfies the terms of your mortgage—think of it as a large good faith payment to lenders
  • Impacts the amount of your monthly mortgage payment
  • Dictates whether you need private mortgage insurance or not

Most traditional loan programs require a down payment of 10 to 20 percent of the loan’s price. The key is to come up with as much as you can. This shows lenders you’re serious about buying a home. Another good reason to save money is for the inevitable closing costs that will occur. For those who have trouble saving, the Federal Housing Authority offers special loans to help both low- and moderate-income families purchase housing.

Fix Your Credit

Similar to saving for a down payment, working on your credit is something you should always be doing—especially if you already know your credit is in rough shape. Bad credit is one of the most common reasons people get declined for a home mortgage loan. Luckily, there are many ways to repair your credit before securing a home loan. These repair tips include:

  • Try to keep your credit card debts below 40% of the maximum allowed.
  • Keep inquires down related to credit applications or credit checks.
  • If you were late, contact your lender and ask for “one time forgiveness.” Most lenders/creditors have a policy where they will remove it – “once.”

In addition to repairing your credit, it’s also important to be vigilant when it comes to your spending. Believe it or not, there are many pitfalls a home buyer can make prior to getting approved for a home mortgage loan.

For instance, don’t open up any new credit cards, don’t close any accounts and certainly don’t go out and buy a new car or flat screen television. Most importantly, keep track of your credit. Understand it and then improve it.

Find the Perfect Team

It’s critical to have everyone on the same page when shopping for a home and working towards a home mortgage loan. Having a realtor who understands your financial situation and can work with your broker is crucial. The same can be said for your mortgage broker. Together, these two roles are imperative to you getting the house you want, at a price you can afford. Teamwork between your mortgage broker and realtor is key.

Following these four tips can put you in a great position to get a home mortgage loan, even if your credit is poor. Remember, you’re not the only one with bad credit trying to buy a house these days.

With over 100 years of collective mortgage experience, the team at Blue Water Mortgage has seen numerous homebuyers who possess less than stellar credit get a home mortgage loan. Our team of loan officers are ready to help you. Contact us today.




Your FICO credit score is without a doubt the single most important factor in getting approved for a home mortgage loan. Forget everything else you think matters.

As the standard credit score in the U.S., your FICO score holds an incredible amount of weight over the terms and conditions (interest rate, etc.) that a lender may offer you when applying for a mortgage.

But your FICO score is much more than just a number—it’s an ever-changing, economic indicator on your ability to follow through with the terms of your mortgage. In short, it’s how lenders know you’re good for the money you’re about to borrow.

Who Calculates Your FICO Score?

FICO, or Fair, Isaac and Company, is a California-based company that provides software to calculate a person’s credit scores—aka your FICO scores.

Your FICO scores are calculated using information credit bureaus such as TransUnion, Experian and Equifax have included in your credit reports. These reports contain the information that each credit bureau has on file about you—such as where you work and live, how you pay your bills, and whether you’ve been sued, arrested or filed for bankruptcy.

“FICO scores are used in more than 90% of lending decisions”

Your score can range anywhere from 300-850. A FICO score in the 700s will put you in good standing and makes it easier to obtain a loan, whereas lower scores affect your ability to borrow. But don’t think of your FICO score as a figure that is set in stone—it can actually change daily. Think of it as a fluid snapshot of your credit record when a lender pulls your credit report—think of it as a number constantly in flux. How it changes from day to day depends heavily on a number of factors.

How Your FICO Score Is Calculated

When a lender uses the generic term “credit score,” what they are really talking about is your FICO score. As mentioned earlier, FICO scores are calculated from many different pieces of credit data in your credit report. This data is grouped into the following five categories:

  • Payment History—A lender will naturally want to know if you’ve kept up with your bills, as this is easily the best indicator of whether someone will default on a loan or not. Paying your bills on time is key to having a crystal clear credit history. This is one of, if not THE, most important factors in your FICO score.
  • Length of Credit History—The longer your credit history the better your FICO score. In some cases, however, a borrower with fledgling credit may have a high score given the rest of their credit report. This factor generally includes: how long your credit accounts have been established—namely the age of your oldest account and newest account, as well as the average age of all your accounts, etc.
  • New Credit—How many new accounts, as well as what type of accounts, is another important part of your FICO score. The amount of credit accounts you open in a given period of time can also have a major impact on your FICO score because it lowers the average account age and further represents that you may be a greater risk than other borrowers. This factor is important, but not nearly as crucial as those mentioned above.
  • Type of Credit in Use—Think of all the different types of credit accounts you have and now ask yourself whether it includes a healthy mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Having a mixture of credit accounts helps a lender determine your overall credit profile.



Four Ways to Raise Your FICO Score

The good thing about your FICO credit score, as mentioned earlier, is that it’s fluid—meaning little tweaks here and there can help change it for the better. The following are a few insider tips you can use to better your credit score:

Keep your credit balances low

  • Using too much of your available credit can lower your FICO score significantly. Keep your credit card balances below 20% utilization. Do your best not to max out cards.
  • If you do have multiple credit cards, spread your spending out across all of them—not just one.

ALWAYS pay on time!

  • Even if it’s just the minimum, make sure you pay your bills when they are due each and every month.
  • Delinquency, the severity of that delinquency and the time passed since your last delinquency, all weigh heavily on your credit score.
  • If you have any public records (bankruptcy, judgments, liens, etc.) on your report, be sure to clear those up as soon as possible.

Keep accounts active

  • Don’t close your old accounts—especially credit card accounts. This affects your total credit utilization, as well as your average age of accounts.
  • Even if you’ve transferred the balance of one credit card to a new account, be sure to keep that old account active. A simple way to keep an account active is to use it for small recurring purchases, such as gas or coffee.

Double check your credit score

  • Every borrower should go through their FICO score with a fine-toothed comb. It would be a shame to let an error adversely affect your overall score and therefore impact your chances of getting a mortgage.
  • Take action on any errors.

At LeaderOne Financial, we understand that your credit is incredibly important to your ability to borrow money and at what rate. That’s why we’ve also come up with these great tips on how to secure a home loan with less than stellar credit. Don’t hesitate to contact us today to learn about ways of preparing your credit further before applying for a home mortgage loan. We’re always happy to help.



FHA Loan Limits to Increase in 2017

If you were house-hunting in 2016, you probably noticed some above-average price tags on homes of all sizes. Well, you weren’t alone. Home prices nationwide saw significant increases. But the good news is that FHA loans for 2017 will also increase.Earlier this month, the Federal Housing Administration (FHA) announced that most parts of the country – 2,948 counties to be exact – will see a rise in FHA loan limits for 2017.

Counties in Kansas and Missouri are a part of this upcoming increase.

According to Zillow, home values across the country increased by about 6% during 2016. Some major metropolitan areas saw double-digit price increases, which resulted in median home prices rising above the current FHA loan limit.

With the FHA loan limit increase, high-cost areas will see the “ceiling” increase from $625,500 to $636,150. The FHA is also increasing the “floor” from $271,050 to $275,665.

In Kansas, the median home value rose 6.7% this year to $144,900. It’s expected by Zillow that this price will increase by about 3.2% throughout 2017. For Missouri, home prices are valued at a median of $140,100, which is 6.1% higher than last year. Homes in both states are predicted to rise by  at least 2.5% in the next year. 

What is an FHA Loan?

FHA loans are mortgages that are insured by the Federal Housing Administration, which is an agency under the U.S. Department of Housing and Urban Development. Borrowers pay for mortgage insurance, which enables lenders to offer loans at affordable interest rates with more flexible requirements and lower down payments. The insurance that borrowers pay for protects the lender from losing money in an instance that the borrower ends up defaulting on the loan.


How Do I Qualify for an FHA Loan?

If you’re unsure whether or not you may qualify for a certain type of mortgage loan, make sure to speak with an experienced mortgage broker who can help you determine your eligibility. We have helped countless borrowers find plans that are ideal for their unique situation – both financially and personally. Don’t hesitate to contact us with any questions you may have.