How I Got Away With 5% Down Payment With “Bad” Credit

Sadie and Chris Madison bought their first home after being turned down by multiple lenders.

My credit score isn’t good.

It’s not even “fair”. 600 is actually considered “bad”.

My husband’s credit is no better.

After talking to multiple lenders, we were no strangers to getting doors slammed in our faces. They all told us it would be “difficult to secure a mortgage”.


We still moved into our dream place and were able to comfortably buy furniture and appliances that made our new house our home.

No balloon interest rates. And no, it wasn’t riskay! I’ve learned that lower down payments are pretty common for first-time buyers.

Here’s how we pulled those strings…

We went to a brokerage

I can’t tell you how many hours I spent researching online until my eyeballs bled out.

I’m telling you, the easier way was talking to a mortgage advisor. At a brokerage, NOT a bank. Because if you go to a bank, they give you the options only offered by that bank. If you go to a brokerage, they scout rates from other lenders to find you the best one.

It’s like Travelzoo of mortgage shopping.

That’s why we were able to get a loan after the banks kicked us to the curb.

We asked a million +1 questions

So I’m sitting with a mortgage advisor and I’m literally asking questions like it was a game.

And the one who asks dumb questions … wins. I won that game.

I kid you not, it’s the best thing you can do. Because discount points, APR, amortization, loan to value, FHA vs. conventional yadda yadda yadda… that would take you weeks to make sense of it all.

Within an hour we knew the price cap on what we could afford. We figured in our monthly payments that would allow for extra cash flow.

We found out that a 5% down payment would leave us with an emergency fund and then some. If we actually had to pay 20% down, we’d have to save up for 17 years to afford a home!

Save yourself weeks of scrolling until your eyes glaze over, gushing blood.

Go ask a mortgage advisor a million +1 questions!

We used our tax credit to qualify us

This loophole made up for our bad credit.

So there’s a tax credit for first-time homebuyers. With that, you get a quarter of your interest refunded back to you after filing taxes.

Because our credit was shot, we made up for it with the refund. It’s like this: credit score isn’t the end-all be-all that determines if you qualify for a mortgage or not. The limit is 580. So even with 580 credit you can still get a loan…

…as long as…

Your income is steady and your debt isn’t through the roof. Our mortgage advisor explained (slowly) to us that our income and debt play a huge role. It’s a balancing act.

What the tax credit does is reduces the debt end of the scale. Which helped to qualify us even with heavy-hitting student loans, daycare costs for our toddler … and the bad credit cherry on top.

It was a double whammy because this little trick also kept our interest rate low because it put us in the “low risk” group.

Less debt = low risk = low interest.

I guess bottom line is look before you leap. Because I can tell you now, we wouldn’t have our own place to call home, to have friends over, to paint the walls, and to fix up the kitchen the way I like… If we didn’t keep our finger on the mortgage pulse.

About the author
Sadie Madison

Mom, wife, adventure seeker #kentuckygal.

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