Many times, people with poor credit won’t even attempt to apply for a home loan because they don’t think they’ll be able to qualify. They automatically assume that because they have some blemishes on their credit history, no lender is going to want to work with them. This is not true.
Even if you have poor credit, you can still pursue your dream of homeownership. It may require a little bit of extra effort on your part, but what’s a little bit of hard work compared to being able to finally pursue a lifelong goal? Below, we’ve shared some tips on getting a home loan with poor credit.
What’s Considered “Bad Credit”?
Before we dive into the specifics about applying for a home loan, let’s talk about credit scores first. Just because your credit score isn’t perfect doesn’t mean it’s bad.
A credit score is considered to be “poor” if it falls between 300 and 579. A score that falls between 580 and 669 is considered “fair” and a score that’s between 670 and 739 is “good.”
There are even certain types of loans that are designed for people with lower credit scores. FHA loans require a credit score of only 580 with a down payment of 3.5%. But if you can put down even more, say 10%, you may even be able to qualify for an FHA loan with a credit score of 500.
Tips for Getting a Home Loan with Bad Credit
When applying for a mortgage with bad credit, the most important thing to remember is to not give up. With hard work and effort, you can still pursue your dream of homeownership. Here are some tips for getting a home loan with bad credit:
- Work on improving your credit score. Having a higher credit score will increase your odds of being approved for a home loan. Try to raise your credit score by paying down your credit cards, making payments on time, and disputing credit report errors.
- Save up for a larger down payment. Lenders are more likely to loan money to borrowers that have a larger down payment. Because the loan amount is lower, the transaction is viewed as less of a risk.
- Explore your loan options. Did you know that there are several types of loans and that credit score requirements are different for each? We recommend learning about the different types of loans and their requirements. That way, you know all of the options available to you.
- Try and try again. Just because your application was rejected by one lender doesn’t mean that there isn’t one out there that’s willing to work with you. Make sure to shop around and check with multiple lenders.
- Look into first-time buyer programs. Ask your lender about first-time buyer programs that you can qualify for. Many of these programs are designed to help buyers who have lower credit scores or less money saved for a down payment.
Chat with an Expert
The best way to see what loan programs you qualify for is to talk to an expert. They’ll be able to guide you through the process from start to finish and answer questions you have about credit scores or any other requirements. Call Mortgage Solutions Financial today to get started!