Not sure whether you’ll ever be able to buy your own house? Do you have a bad credit record? What if we tell you there is a loan option for buyers with bad credit? Surprised!
With the US Mortgage corporation, nothing is impossible. We know buying a home is really overwhelming especially when you don’t have enough of a down payment and bad financial record. Read this detailed article to know how to get qualified for a mortgage loan, and improve your credit score.
What is the minimum credit score requirement?
According to FICO, 670 is the minimum credit score required to get approved for a mortgage loan. Anything below this number is referred to as subprime or poor.
Most mortgage lenders are lenient towards the credit score range. Anything between 580-669 is considered a fair score. Whereas 300 to 579 is poor.
What you need to know is that mortgage lenders can have different terms & conditions for approving loans. While the mortgage plans insured by the government come with comparatively low credit score requirements.
For buyers with credit scores below 500, it is important to maintain a healthy transaction record to increase the credit rate.
How do lenders look at your credit score?
- Size of your down payment.
- Total debts of the borrower.
- Total gross income of the borrower.
- Pending mortgages, if any?
Cash is the solution to cover a bad credit score. The credit score is only the qualifying factor that helps you get approved for a mortgage loan or refinancing. But if you can cover the difference by putting a sizeable down payment, the lender will immediately approve your application.
Are you Interested in Refinancing?
Contact our refinance loan experts at (800) 562-6715 to get the best possible solutions!
What should you keep in mind?
- Buying a home with a bad credit loan simply means higher monthly mortgage installments and higher interest rates.
- Don’t worry! There is always a chance to improve your credit score and refinance your mortgage to shorten the loan terms or reduce the monthly payments.
Available loan options to buy a house with bad credit
No fixed limit and criteria are set for monthly income, down payment, or credit score. The minimum credit score requirement is 620 or better. To get approved, make sure you have more income than the loan amount.
Federal housing administration loan for first-time buyers is insured by the government. The minimum credit score should be at least 500. There are better chances that you’ll get approved easily because of fair terms & conditions.
Only veterans, ex-military men, or active members of the armed forces can apply for veteran affairs loans. One doesn’t need any down payment and no minimum credit score.
These loans are supported by the U.S. Department of Agriculture. 640 is the minimum credit score requirement to get approved easily.
What if you get rejected for a bad credit Mortgage?
Is your credit score even below 500 and don’t have enough savings for a down payment? Unfortunately, The only option is to work on increasing your credit score. Be patient, and maintain a consistent credit record for at least 6-12months.
So, you can have more loan options at low-interest rates, and affordable down payments. If you need our assistance or have any inquiries, the US mortgage team is always ready to help you.
Looking to buy a house with bankruptcy status?
So, if you really want to get pre-approved and want the lender to offer better loan options; wait for a minimum of 2 years. All you need to do is focus on the best ways to increase your credit score. Take a look at some of the important qualifying factors!
Maintain a good record of payment history by paying your bills on time, no pending mortgages, and others. As it evaluates to 35% of credit score.
Period of Credit History
The older, the better! 15% of your credit score valuation depending on the average age of your credit account.
New Credit Account
A less than 6 months old credit account is considered the new credit and can decrease your credit score by 10%.
Type of Credit
Having a mix of credit in your valuation report works in the favor of the borrower. It can be a personal loan credit, car loan, or revolving credit.
Amount of credit you are using
About 30% of your credit score rating depends on your utilization of credit cards. For a better score, use credit more!
Add new Credit Accounts
To increase your credit score, lenders always advise their clients to open new accounts in bulk and in the same time frame for a convincing payment record.
Find a Co-Signer
If you are targeting a bigger loan amount, it’s best to find a co-signer qualified for immediate approval. The reason is you’ll have more valuable assets and income.
Our Final Verdict on Bad Credit Home Loans
Now, you know the pros and cons of getting home mortgages with bad credit. No doubt there are some limitations, but you can still enjoy the leverage of buying your own home. VA and FHA are such two best examples of home loans that even work for clients with 500 credit scores.
Need our assistance? Create a free US Mortgage account, and talk to our best mortgage lenders to know where you stand!