If you are wanting to buy a home but have bad credit, you have probably dismissed the idea thinking that because of your credit it's not in the cards. However, the good news is that nothing could be further from the truth!
So sit down, relax, and buckle up because this is just the beginning of your home buying journey and it's going to be an exciting one!
Credit Score Break Down
Lenders put a lot of weight on your credit score when looking at your home loan application. Here are the credit score ranges and what each of them means for you.
• A Credit Score Below 600
FHA loans will accept a credit score as low as 580 and as little as a 3.5% down payment. They will sometimes accept even lower scores, sometimes even as low as 500; however, a larger …show more content…
In this range, you might also qualify for a VA or agriculture loan as well.
• A Credit Score Between 650 and 699
Almost half of all FHA loans are within this range. However, you might also qualify for a conventional loan as well.
• A Credit Score Between 700 and 750
In this credit score range, just about any type of loan will be much easier to qualify for and will generally carry a much lower interest rate that one with a credit score below 650.
• A Credit Score Above 750
Any credit score above 750 is considered very good and, therefore, there is no reason to believe your application won't be approved, barring any other negative factors such as sufficient income, etc.
How to Qualify for a Home Loan with a Low Credit Score
There are several ways to qualify for a home loan if you have a low credit score. If you want to prove your creditworthiness, you will need to put more money down, show proof of positive (verifiable) rental history, write a detailed letter explaining your circumstances, and proof of savings that reflects enough money to pay your mortgage for three to six months or …show more content…
1. Get a Second and/or Third Job
Showing proof of additional income is a great way to show you're financially responsible and are serious about buying a home. Getting a second and/or third job will not only show you're responsible, but it will also provide you with additional income for a larger down payment, enough monthly income to qualify for a home loan, and more money to put into your savings account to show you have enough reserves to handle a mortgage should an unforeseen emergency arise.
2. Lower Your Debt-to-Income Ratio
Having a second income will also lower your debt-to-income ratio, that is, if you don't continue spending and increasing your total debt amount.
How an FHA Loan Works
An FHA loan is backed by the government and insured by the Federal Housing Administration which protects the lender from loss if a borrower defaults.
An FHA loan has the following criteria:
• A 500-579 credit score will require at least a 10% down payment.
• A 580+ credit score will require at least a 3.5% down
So sit down, relax, and buckle up because this is just the beginning of your home buying journey and it's going to be an exciting one!
Credit Score Break Down
Lenders put a lot of weight on your credit score when looking at your home loan application. Here are the credit score ranges and what each of them means for you.
• A Credit Score Below 600
FHA loans will accept a credit score as low as 580 and as little as a 3.5% down payment. They will sometimes accept even lower scores, sometimes even as low as 500; however, a larger …show more content…
In this range, you might also qualify for a VA or agriculture loan as well.
• A Credit Score Between 650 and 699
Almost half of all FHA loans are within this range. However, you might also qualify for a conventional loan as well.
• A Credit Score Between 700 and 750
In this credit score range, just about any type of loan will be much easier to qualify for and will generally carry a much lower interest rate that one with a credit score below 650.
• A Credit Score Above 750
Any credit score above 750 is considered very good and, therefore, there is no reason to believe your application won't be approved, barring any other negative factors such as sufficient income, etc.
How to Qualify for a Home Loan with a Low Credit Score
There are several ways to qualify for a home loan if you have a low credit score. If you want to prove your creditworthiness, you will need to put more money down, show proof of positive (verifiable) rental history, write a detailed letter explaining your circumstances, and proof of savings that reflects enough money to pay your mortgage for three to six months or …show more content…
1. Get a Second and/or Third Job
Showing proof of additional income is a great way to show you're financially responsible and are serious about buying a home. Getting a second and/or third job will not only show you're responsible, but it will also provide you with additional income for a larger down payment, enough monthly income to qualify for a home loan, and more money to put into your savings account to show you have enough reserves to handle a mortgage should an unforeseen emergency arise.
2. Lower Your Debt-to-Income Ratio
Having a second income will also lower your debt-to-income ratio, that is, if you don't continue spending and increasing your total debt amount.
How an FHA Loan Works
An FHA loan is backed by the government and insured by the Federal Housing Administration which protects the lender from loss if a borrower defaults.
An FHA loan has the following criteria:
• A 500-579 credit score will require at least a 10% down payment.
• A 580+ credit score will require at least a 3.5% down