A Low Credit Score isn’t always a deal breaker
The first step is finding out your FICO score. According to Experian a score above 740 is considered very good. A score of 580-740 is considered “sub prime.” If your score is sub prime, it doesn’t mean you can’t get a mortgage. It does mean more work on your part or paying a higher interest rate.
What To Do If You Can’t get a Conventional Loan
A “conventional loan” is the type where you walk into your local bank branch office and ask to apply for a home mortgage. There are other ways! From online platforms (which can still be considered conventional) to government backed mortgages, there are plenty of options.
1. There are private lenders
Finding them can be difficult. These lenders typically approve you based on factors other than just your credit score and usually approve a loan on a specific home.
2. FHA mortgages
These are government guaranteed mortgages that are still made through traditional lenders. These mortgages are meant to encourage home ownership. The government reimburses the bank for what it loses if you don’t pay the mortgage. Even with a FICO score as low as 580, you can qualify for an FHA mortgage with as little as 3.5 percent down. If your score is lower than that, you’ll be required to put at least 10 percent down.
3. If you’re a service member or veteran, you might qualify for a VA loan
VA mortgage lenders typically require a credit score of at least 620, but it’s possible to find some that will accept a 580. The big bonus is that VA loans don’t require a down payment.
4. Make up for bad credit with more cash
Since a low credit score is a sign to lenders that you’re a riskier borrower, offsetting some of that risk can help increase your chances of getting approved for a mortgage. One way to do that is to offer up a bigger down payment.
5. Get a co-signer
If you have a close family member or friend with good credit, you could consider having them co-sign the loan. A co-signer essentially lets you use their good credit to get approved.
6. A final suggestion
Though this takes patience, consider waiting and repairing your credit first. It might seem like a lot of work now, but it can save you thousands in the long run.
For over 35 years, listening to clients and putting them at ease, while finding solutions and helping achieve future goals, in Marion County, Lake County. Citrus County, Sumter County, and The Villages.
