Buying a Home With Credit Score Less Than 600

Reader Question: How could I buy a home with a credit score less than 600?

Somebody asked a very similar question about two weeks ago, but for a credit score in the 656 range. So for starters, I would recommend reading that Q&A session.

Of course, your score of 600 presents even more of a challenge when buying a home. There was a time when a score in the low 600s was right on the subprime "boundary." At or below a 620 most lenders would view the person as a subprime borrower.

But things have certainly changed over the last couple of years. In the current economy, most mortgage lenders -- if not all of them -- will view a person with a credit score below 600 as a subprime borrower. And as you can read from this article on the subject, bad credit loans have become virtually extinct.

My advice is to hunker down and focus on improving your credit score. The housing / financial market is going to get worse before it gets better. Turn on CNN right now, and you'll hear all about it.

I think you would have a hard time finding a mortgage loan with a credit score less than 600 points. And if you did find a willing lender, they would pile a ton of interest on top of your principal, which would inflate your mortgage payment by a ridiculous amount.

If you improved your score by 70 points or more -- which is not all that difficult, by the way -- you would have a much easier time getting a loan and buying a house. You would also qualify for a better interest rate on the loan, which means a smaller mortgage payment each month.

Good luck.