Can I Qualify For a Mortgage Loan With Bad Credit?
Are you considering buying a home but worried about your bad credit rating?
Let’s face it, the majority of us have faced financial blunders in life: unpaid credit card bills, student loans from college and late cell phone payments -sometimes these things just happen.
The truth is, your bad credit doesn’t have to hold you back from getting the home of your dreams. In fact, qualifying for a mortgage might even be easier than you think.
We’ve put together a simplified guide on how to qualify for a mortgage with a bad credit rating.
Take a look and see if you qualify!
What Exactly is a Bad Credit Score?
In general, a “bad” credit score is any score that falls below 670. These scores would qualify as fair credit and poor credit and may cause borrowers difficulty in qualifying for a conventional loan.
According to FICO guidelines, the minimum credit score required for conventional home loans is 620. Even with such a score, borrowers may have their borrowing power reduce and be offered limited options.
But, it’s not all bad for those lacking in creditworthiness.
There are certain programs in place that allow for borrowers with poor credit scores. The FHA (Federal Housing Administration) loan, for example, provides loans to borrowers with 580 or higher credit score.
What are FICO Loans?
A FICO loan is a mortgage that is insured by The Federal Housing Administration.
These loans are especially popular amongst first time home buyers and those lacking proper credit looking to qualify for a mortgage.
While FICO loans generally apply to borrowers with a 580 score or higher, they will qualify those with a lower score, but there is a small catch. For borrowers with a score of 500-580, borrowers are required to have a 10% downpayment as compared to the standard FICO 3.5%.
Possible? Very. It just might mean this crowd will need to spend a while longer saving up for that higher downpayment. It is important to remember that the lower the credit score, the higher the interest that will have to be paid on the loan.
Help exists, use it! For further guidelines as to whether you can qualify for a FICO loan, visit our webpage.
Helpful Hints for Improving Credit Score
As always, there are steps one can take to improve their credit score and improve the possibility of qualifying for an admirable mortgage:
- Pay bills on time
- Keep the balance on credit cards low
- Avoid large purchases prior to qualifying
- Keep your credit history of paid debt on your report
- Minimize risk -avoid using your credit card at unfavorable locales such as pawn shops, money advance services, etc.
Following these simple steps can help to improve one’s credit score immensely. This may take borrowers from qualifying for a FICO loan requiring a 10% downpayment, to a loan only requiring at 3.5% downpayment.
Are You Ready to Qualify for a Mortgage?
A bad credit rating doesn’t always mean property ownership is not in the cards.
With the tips from above, those with a bad credit rating are able to take the steps necessary to one day own a home. It looks like the house of your dreams might not be so far out of reach!
Are you ready to see if you can qualify for a mortgage?
Get started here!