In the United States, the average person’s credit score is 689. But do you actually know what this number means for you and the home buying process?

Having bad credit can harm your chances of getting approved for the mortgage you need to buy your dream home. But you do have options.

So what are these options? And which one is right for you?

Keep reading for our tips on how to buy a house with bad credit.

What Is a Credit Score?

A credit score is a number representing your credit history, which is a detailed report of all credit or debt you have ever owned. This report includes things like credit balances, missed payments, and credit inquiries.

The industry standard is the FICO credit score. This score ranges from 300 to 850. The higher the number the better, but what is considered a “good” or “bad” score is subjective.

What Does It Mean to Have Bad Credit?

If a lender considers you to have bad credit, it means that your credit history and score show a pattern of mismanaging debt. This can be caused by many factors including late payments, high credit card balances, and a short history.

Lenders are often hesitant to lend to those with bad credit because they are more likely to miss payments or default on the loan. These borrowers pose a high financial risk to the lender.

How to Buy a House with Bad Credit

Having bad credit may limit your mortgage options, but it doesn’t make obtaining a home loan impossible.

Here are six options to make purchasing a home with bad credit possible.

1. Repair Your Credit

This is easier said than done, but the best course of action is to repair your credit score. Of course, this requires time which you might not always have the leisure of taking.

While there are companies that offer credit repair services, the best course of action is to adopt healthy habits on your own. Taking steps to improve your credit, such as opening and responsibly managing a secured credit card, can increase your score with surprising speed.

With time, these efforts will improve your score. Even an improvement of a few points can be beneficial when purchasing a home.

Keep in mind that negative items on your credit report will no longer affect your score after seven years. If your poor credit comes from mistakes made several years ago, you might see an improvement in your score by simply waiting a couple more months or years.

2. Apply for Alternative Home Loans

There are certain types of mortgages that cater to homebuyers with poor credit, such as FHA home loans and sub-prime mortgages.

These alternative home loans often come with special stipulations and requirements to qualify. Consult with your realtor or lender for the exact requirements for your situation.

3. Agree to Higher Rates

While you might consider yourself a safe, responsible borrower, a low credit score indicates to a lender that you’ve mismanaged debt in the past.

But lenders might be more willing to work with you if you agree to higher rates. These higher rates–mortgage interest rates and fees paid to the bank–help protect the lender against the greater risk of lending to someone with poor credit.

4. Offer a Larger Down Payment

Offering your lender a larger down payment means that the total loan amount will be smaller. As a low credit score will only qualify you for small credit limits when applying for a credit card, the same is true for mortgages.

Unfortunately, in most situations, there is little you can do to come up with a larger down payment aside from simply saving for a longer period. But pairing a longer saving period with a credit repair strategy could greatly increase your chances of being approved for a mortgage in the near future.

5. Find a Cosigner

As with other types of loans, some mortgage lenders will allow a cosigner. This person shares responsibility for the loan if you were to default on or otherwise mismanage it. Their credit will also be harmed if the mortgage is not handled responsibly.

While you might be able to find a family member or close friend who is willing to cosign, it will likely not be an easy search. Understand that this is a huge responsibility to ask someone to take on.

6. Opt for a Private Mortgage

If a bank or other financial institution won’t approve your home loan request, you may be able to pursue a private mortgage.

A private mortgage involves borrowing the loan amount from an individual, such as a family member or friend. Of course, for this method to be an option, you must have someone in your life who both has the liquid assets necessary and is willing to lend out these assets.

This loan type is exempt from much of the approval process necessary for a traditional mortgage, such as the state of your credit, but you and the lender should still enter into this agreement with great care. You should consult with a lawyer throughout the loan process to ensure everything is handled correctly.

Consult with Your Realtor

The right realtor will work with you to understand and work with your financial situation. They may have their own suggestions for how to buy a house with bad credit and know lenders who are more flexible in these situations.

To learn more about the home buying process, you can find more articles on the blog.