How Do You Buy a House if You're Broke?

Purchasing a home is a significant milestone and a dream for many Americans. However, it can be challenging to reach this goal without enough cash upfront and above-average credit. Many people wonder how to buy a house if they're broke.

If you want to buy a house and you're broke, you need to first work on your credit score. Next, you should save what you can to put toward a down payment and look into government programs to see if you qualify for assistance. You should work out a budget and talk to a potential lender for advice.

Let's discuss some tips to help you prepare for buying a home, even if you're a low-income earner.

Improve Your Credit Score

Regardless of your income, a good credit score can help you buy a house. Start by getting a copy of your credit report. The three credit bureaus, Equifax, TransUnion, and Experian, may have slightly different information about you, so it would be wise to check each of them. 

Carefully check your reports for errors. Things like accounts that you don't remember opening or that are associated with addresses that you don't recognize are red flags for fraudulent activity. Contact the reporting agency immediately if you find mistakes or fraud. 

Save Up for a Down Payment

The days of required 20% down have changed, and many first-time homebuyers put down less than 5% of the purchase price. Working out a budget and planning to save will help you build up your down-payment fund. 

There are also mortgage types that allow for smaller down payments, such as: 

  • Fannie Mae and Freddie Mac - These government-backed mortgages only require 3%, but you will need at least a credit score of 620, with 670 preferred. 
  • Individual lender programs - Some lenders offer down payment assistance for borrowers with credit scores that meet their requirements. 
  • FHA loans - 3.5% minimum down payment. These are a good option for borrowers with lower credit scores, with lenders accepting a minimum score of 580.
  • VA loans - If you or your spouse served in the military, you may qualify for a 0% down loan backed by the Department of Veteran's Affairs. This program also has benefits like lower fees and closing cost maximums.  
  • USDA loans - This is also a government-backed 0% down loan for those looking to buy in rural areas. The purchase property will need to meet the eligibility rules laid out by the USDA.

Check Out Government Assistance Programs

When thinking about buying a house if they're broke. There are assistance programs available for many low-income and first-time home buyers. It would be helpful for you to check out the U.S. Department of Housing and Urban Development's (HUD) site for assistance programs in your state. 

Other assistance programs include:

Final Thoughts

Buying a home doesn't have to be just a dream. You can make your homeownership goals a reality by improving your credit and either saving for a down payment or qualifying for an assistance program. To find out the best course for your situation, you should speak to a qualified lender. HUD has excellent resources, including lender lists, on their website with a lot of helpful information for potential home buyers.