Back in the early to mid 2000's, it was possible for folks with bad credit (below 580), no job, or no money to purchase a house. Typically this involved a lender either fraudulently overstating the borrowers income with a stated-income sub-prime mortgage or the borrower had good enough credit to obtain a mortgage a 100% loan-to-value.
Those days are LONG GONE!
Some of the subprime borrowers could not pay their mortgages and as a result, lending standards tightened for everyone. So what is a potential home buyer to do if they have bad credit, are unemployed, or no money for a down payment?
If You Have Bad Credit:
Repairing bad credit will not happen overnight unless the reason for your bad credit is a mistake. Before you ever venture online to start dreaming of your high-rise condo, visit Annual Credit Report to download your credit report for free from the three major bureaus. Annual Credit Report is the only place where you can get your report for free – without the strings-attached sales pitch of Freescore and Free Credit Report. If you have errors, make corrections by filing disputes.
Next, start paying off your debt. Consider selling items or taking a second job if necessary to pay off high balance credit lines like credit cards. Do not close the lines of credit if you pay them off and use them sparingly to keep them open. Many credit issuers closed dormant accounts a year or two ago when the credit crisis was at its peak. If you survived, congratulations.
Final tip is to never miss a payment going forward. If you want a house, you will need a credit score above 580 for a FHA loan at 96.5% LTV but most lenders have overlays that drive that score above 620. Either way, a good payment history is essential to raising your score so start today by creating a good payment history.
If You Are Unemployed:
Get a job. Sorry but there's not really a solution to this one.
If You Don't Have Money For Down Payment or Closing Costs:
Believe it or not, there are programs available to buyers in the Charlotte for borrowers with little to no money and want to purchase a house. HouseCharlotte, the North Carolina House Finance Agency (NCHFA), and the USDA Rural Dev programs offer 100% loan-to-value financing. NCHFA and HouseCharlotte also offer closing cost programs as well but they have strings attached that borrowers need to be aware of. Depending on the situation with the seller, they may be able to pay a portion of your closing costs and FHA will allow that money to come as a gift from a family member.
That being said, buying a house with no money in reserves can be a very unwise decision as the owner faces the possibilities of not being able to make repairs when items break.