To buy a home with a credit problem, focus on repairing your credit score and exploring specialized mortgage programs. First, obtain a free credit report from and dispute inaccuracies. Pay down credit card balances to boost your score, as utilization (credit used vs. limit) significantly impacts ratings. Consider a credit counseling agency for debt management plans. Next, research mortgage options: Federal Housing Administration (FHA) loans require a minimum score of 580, while some lenders offer non-traditional loans for scores below 580. VA loans for military veterans and USDA loans for rural areas may also accommodate lower credit scores. Secure pre-approval from a lender to understand budget constraints and strengthen your offer. Finally, budget for closing costs, property taxes, and insurance, which can total 2-5% of the purchase price.

Credit repair is critical because mortgage approval and interest rates depend heavily on creditworthiness. For example, a FICO score below 580 often results in loan denials or high-risk lenders charging exorbitant rates. According to Experian, 1 in 5 consumers in the U.S. has at least one error on their credit report, which can lower scores by 50-100 points if unresolved. Disputing inaccuracies can raise scores by 20-30 points within three months, as shown by the Consumer Financial Protection Bureau (CFPB). FHA loans, requiring a 580+ score, offer 3.5% down payments, making them accessible despite credit issues. In 2022, 6.5 million FHA loans were issued, with 64% to borrowers with scores below 700 (U.S. Department of Housing and Urban Development). Non-traditional lenders like Self-Help Federal Credit Union offer mortgages for scores as low as 550, but with higher interest rates (8-12%). Budgeting is essential: the National Association of Realtors reports that 27% of buyers with credit problems initially underestimated closing costs, leading to financial strain. Proactive credit repair and lender selection can reduce mortgage costs by 1-3% annually, saving thousands over the loan term.