Showing you have several months of "mortgage payments" in savings after closing reduces the lender's perceived risk.
An insightful way to look at this is through the lens of Academic studies, such as those by Rosenthal (2002) and Bostic et al. , suggest that if low-credit households had "unblemished" credit, homeownership rates in the U.S. could increase by roughly 4 to 10 percentage points . 1. Traditional vs. Alternative Loan Paths can you buy a house with poor credit
Newer underwriting models, such as FICO 10T and VantageScore 4.0 , are beginning to incorporate positive rental history into credit files to help "thin-file" or low-credit borrowers. 3. High-Interest & Non-Traditional Alternatives Showing you have several months of "mortgage payments"
Backed by the Federal Housing Administration, these allow scores as low as 500 (with a 10% down payment) or 580 (with a 3.5% down payment). could increase by roughly 4 to 10 percentage points
Research indicates that while "poor" credit—typically defined as a or a CIBIL score below 650 —presents a significant barrier to homeownership, it does not make it impossible.