If you’re in the market for a home and have a low credit score, you may be concerned about your options. However, you can find a variety of mortgage loan programs that will help you achieve your homeownership goals.
The best way to determine which mortgage program will work for you is to consult a mortgage loan officer. He or she can help you understand the requirements for each mortgage program. Depending on your income, employment, savings, and down payment, you can choose the mortgage that will best fit your budget and needs.
When looking for a mortgage, you will want to compare the rates, fees, and terms of different lenders. You can use online tools to compare quotes for various lenders. Some lenders, like Clear Lending, offer a wide range of products. They will also help you with solutions to problems related to high debt-to-income ratios.
A lender’s minimum credit score requirements can vary from lender to lender. However, the average mortgage borrower has a FICO score of at least 620. While a few lenders allow a lower score, you will likely pay more in interest, and the monthly payment may be higher. This is because the lender is taking a risk with the loan.
While it’s always a good idea to shop around, you should be prepared to take a wait and see approach. Having a few months’ worth of emergency savings can help you get through the initial process of applying for a mortgage. It’s also a good idea to check with your local credit unions to see if they offer more forgiving terms.
If you’re not ready to move forward with a mortgage, consider renting instead. Then you can build your credit while improving your habits. Once you’re ready, you can refinance the mortgage to get better terms and lower payments. Buying a house can be expensive, so you may be better off waiting until you can afford a larger down payment.
Another way to qualify for a low credit home mortgage is by using a co-signer. Your co-signer’s income and assets will be taken into consideration, and they could be able to qualify you for a higher loan amount.
Having a down payment and a positive payment history are two of the best ways to boost your chances of getting a home loan. However, if you can’t get your credit under control, you’ll probably have to pay a higher interest rate. Fortunately, there are a number of government-backed loans that have lower down payment and credit requirements.
For instance, the Freddie Mac Home Possible Program offers first-time homebuyers the opportunity to buy a home with as little as three percent down. Freddie Mac’s program is designed to help low and moderate-income borrowers. Whether you have a FICO score of 500 or 660, a down payment of three to five percent can make a big difference.
A lender will also be interested in the down payment you can afford. Most FHA-backed lenders require a down payment of at least 3.5 percent. But if you have a smaller down payment, you may be required to purchase private mortgage insurance (PMI) to cover the costs. Besides, a low down payment can put you at a higher risk of defaulting on the loan.