83% of Americans think that owning a home is a key milestone. However, 25% of aspiring home buyers with poor credit scores feel they can’t afford a home. 7 of 10 mortgage applicants with poor credit scores (300-579) have been denied a home loan at least once.
Coupled with this, 32% of home loan applications have been rejected in Florida due to bad credit in the last few years. But there’s a silver lining! 30.4% of borrowers were able to buy a house with bad credit in cities like Lakeland in Florida. And so can you!
You can choose an FHA loan that has lenient credit requirements. You may opt to make a larger down payment with low credit score to increase your chances of getting a loan. You can also look for your dream home with Houzeo.
Buying a House With Bad Credit
- Median Home Price in Florida: As of June 30, the median home price in Florida is $398,077.
- Mortgage Interest Rate: The 30-year fixed-rate mortgage in Florida is currently at 6.27%, whereas a 15-year FRM stands at 5.56%.
- Credit Score Requirement: You must have a minimum score of 500 for an FHA loan and 620 for a conventional loan.
- Down Payment and Closing Cost Requirement: Allocate as much money as possible towards a down payment as it will decrease your loan-to-value ratio. And budget 2% to 5% for closing costs.
- Cheapest Places to Live in Florida: Lake City and Pensacola are some of the cheapest places to live in Florida, with the median home prices being $256K and $268K, respectively.
How to Buy a House in Florida With Bad Credit in 4 Steps
A low credit score doesn’t necessarily mean you are disqualified for a loan. Here’s how you can get a house with bad credit in Florida.
Step 1: Analyze Your Credit Score
You must have a clean credit history before you apply for home loans in Florida with bad credit.
- Review Your Credit Reports: Check each credit report for errors and negative marks that could affect your score. This includes checking for late payments and defaults.
- Dispute Errors and Discrepancies: If you find mistakes on your credit report, dispute them directly with the credit bureau. Flag the errors and provide documentation to prove they’re wrong.
- ⬇️ Download your credit reports: You can get a free copy of your reports from AnnualCreditReport.com.
Step 2: Explore Mortgage Loan Options for Bad Credit
All types of home loans are not available for individuals with bad credit. Here’s a list of mortgages with the required minimum credit score to buy a house in Florida.
| Loan Program | Minimum Credit Score |
|---|---|
| Conventional Loans | 620 |
| FHA Loans | 500 - 580 (Depending on down payment) |
| VA Loans | No Limit. However, lenders favor a score of at least 620. |
| USDA Loans | No Limit. However, lenders favor a score of at least 640. |
- Conventional Loans: The minimum credit score required for conventional loans is lower—620 for Fannie Mae and 660 for Freddie Mac. However, a 3% down payment is mandatory for each of these loans.
- FHA Loans: The Federal Housing Administration insures FHA Loans. It enables mortgage lenders to accept credit scores as low as 500 with a 10% down or 580 with a 3.5 percent down. However, you can only use FHA loans to purchase a primary residence.
- VA Loans: These loans are available to active-duty military personnel, veterans, and their spouses. VA loans don’t have a minimum credit score requirement but many lenders favor a minimum score of 620.
- USDA Loans: The U.S. Department of Agriculture offers USDA loans to encourage homeownership in rural areas. Although not mandatory, many lenders prefer a minimum credit score of 640.
Step 3: Get a Mortgage Pre Approval
Getting a mortgage preapproval can help you buy a house with low credit. It determines whether or not you qualify for a loan. Additionally, it also informs you about your mortgage interest rate and monthly payments and helps you manage your finances better.
A mortgage preapproval indicates that you are serious about buying a home in Florida. Find a lender and get pre-approved to begin your home-buying journey.
Get Pre Approved for a Mortgage in FL🏡
Select Your Loan Type
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New Home Purchase
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Mortgage Refinance
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Cash-out Refinance
Step 4: Budget Your Income Well
Apart from credit score, mortgage lenders also consider other factors in your loan application process. These include annual income, savings, past and current active loans, and investments.
A well-managed budget demonstrates responsibility and financial stability to lenders, potentially making you a serious borrower.
Take the guesswork out of budgeting with Florida’s #1 Mortgage Payment Calculator. Instantly access a free amortization schedule and get a detailed breakdown of costs.💲
How to Get a Home Loan in Florida With Bad Credit?
Here are some ways you can get a mortgage to purchase a home with bad credit in Florida:
1. Pay-Off Existing Debt
Before buying a house in Florida with bad credit, you should pay back the money you already owe. This will not only improve your credit score but also lower your DTI. A low Debt-to-Income ratio makes you eligible for bigger mortgages.
2. Put More Money Down
One of the fastest ways to buy a house with bad credit in Florida is to put more money down. Look for cheap houses for sale in Florida, as the down payment will likely be more affordable. This also lowers the loan-to-value ratio, which helps with bad credit home loans.
3. Find a Co-Signer
A co-signer is responsible for paying back the loan if you default on payments. A co-signer with strong creditworthiness can make you a more attractive borrower.
4. Shop Around
Different lenders in the market offer different rates. In addition to securing the best loan terms with bad credit, thorough research can help you find a mortgage that fits your budget.
Bottom Line
Buying a home in the Sunshine State with bad credit can be difficult but it is achievable. It’s important to prepare and plan. Your dream of becoming a homeowner can come true if you raise your credit score, save money for a down payment, and look into various loan options.
Expand your home search to include areas with lower housing costs. You can also look for tiny homes in Florida for sale, but prioritize an option that aligns with your needs and lifestyle.
Find Homes For Sale in Florida by Cities
Home prices vary depending on the city you choose in Florida. Here’s a glimpse into some resources that can help you explore city-specific housing markets:
Frequently Asked Questions
What programs are available for buying a house with bad credit in Florida?
There are limited loan options available for someone with poor credit. Some of them are VA loans and FHA loans.
What is the lowest credit score you can have to buy a house in Florida?
The lowest credit score required to buy a home with bad credit in Florida is 500, with a downpayment of 10%.
Can I buy a house with bad credit in Florida?
Yes, government-backed loans like FHA or VA loans offer more lenient credit requirements. Consider a larger down payment or a co-signer to qualify for a mortgage with bad credit.
