401k Down payment with bad credit

[Gregg Hutton]

hello fellow investors, my wife and I need to move out of our first property in northern VA to a much bigger home for our growing family. I have 8300 to put down thru my 401k but our credit is bad. is there anyway to still find any private lenders who can help? our first property had already been evaluated and will be taken care of by a property manager we have built a relationship with.

[Stephanie Medellin]

@Gregg Hutton It depends on a lot of things and the only way to know for sure is to have a loan officer look over your finances and credit report. What price range are you looking in for your new home? FHA loans go down to a 500 FICO score (only a handful of lenders will actually do these loans with a score that low), but under 580 requires a 10% down payment. If houses are around $80,000 and you can get a seller credit or lender credit for closing costs, that could potentially work with an $8000 down payment. If your score is 580 or higher, you could potentially qualify for only 3.5% down. ( I say "potentially" because there are other qualification / requirements besides your credit score.) The lower your credit score, the lower the allowable DTI (debt to income ratio), so that's another consideration.

As for private lenders or lenders that don't follow government or agency guidelines, they typically want a much larger down payment 25-30%, and they will put a much lower emphasis on credit.

A local mortgage broker is your best source for accessing these types of programs.