To buy a house with bad credit, first assess your credit score and correct inaccuracies on your credit report. Next, improve your score by paying bills on time, reducing credit utilization, and avoiding new credit inquiries. Explore government-backed loans like FHA mortgages, which require lower credit scores (as low as 580) and smaller down payments (3.5%). Consider a co-borrower with better credit to strengthen your application. Budget for closing costs, mortgage payments, property taxes, insurance, and maintenance. Finally, work with a reputable lender to navigate approval processes and negotiate terms.

The steps above are effective because credit score improvements and alternative loan programs directly address the primary barriers to homebuying for those with poor credit. According to the Consumer Financial Protection Bureau (CFPB), 50% of homebuyers with credit scores below 620 secured mortgages through FHA loans in 2022, compared to 35% for conventional loans. The Federal Reserve notes that a 50-point credit score increase can reduce mortgage rates by 1-2%, saving hundreds annually. FHA loans require just 3.5% down, making homeownership accessible despite credit challenges. A co-borrower can boost approval chances by 30-40%, as shown by the National Association of Realtors (NAR) 2023 study. Additionally, timely payments over six months to a year can improve credit scores sufficiently for loan approval, per FICO data. These strategies collectively lower financial barriers and expand housing opportunities for credit-challenged buyers.