To qualify for a mortgage with bad credit, Realtor.com advises consumers to apply for FHA (Federal Housing Authority) loans. Guaranteed by the U.S. government, these mortgages are funded by banks, and they are available to borrowers with credit scores of 580 or above.
In some cases, having a cosigner can help to offset a bad credit score when applying for a home loan. According to Investopedia, if a borrower has a cosigner, the bank treats the loan as if both applicants will pay the monthly mortgage payments, and the bank looks at both borrowers' credit histories. Consumers who do not have a cosigner can ask the bank for an exception to a mortgage application rejection. Some banks are willing to accept personal statements or explanations about why certain bad debts should not be considered in the mortgage application process.
According to Forbes, borrowers can save a lot of money over the lives of their mortgages if they improve their credit scores before taking out a mortgage. To work on their scores, buyers should be aware of what is on their report. They should also try to pay all of their bills on time and keep their debts as low as possible.