You probably know that there is such thing as a “bad” or less than perfect credit score. In this article, we’ll talk about what it takes to buy a house with a poor credit score, and how understanding one’s own personal finances can assist in the process.
What If I Have Bad Credit?
You’re probably wondering what your credit score is and how it affects you. Credit scores range from 300 to 850 for base scores, with an average being around 500 or higher – but this may not be the best indicator of whether someone will be approved for a loan! Each lender has its own requirements, and they can vary widely from one another. Factors include not only credit score, but debt load, payment history, employment, income and others. Knowing one’s personal performance in these areas can help guide future financial decisions – including buying a home!
The mortgage lending industry is full of surprises, but one that might surprise you is that for most lenders, you do not need to have a perfect credit score.
What Possible Ways Exist to Buy a House With Bad Credit?
Avoiding subprime loans is important because of the risks associated with them. If you are looking for an affordable mortgage with bad credit and want to know what options are available, we have compiled a list below!
The average score requirement depends on which type of loan product one chooses:
Conventional loans are easy to qualify for, as long as you have the right qualifications. The minimum credit score required is 620 or higher and there’s no set income requirement – so even if your finances look a little different from most people in this category it may still be possible!
FHA loans are a great option for first-time homebuyers with lower credit scores. The minimum required score to get an FHA loan is 580, which means that even if you have some trouble qualifying in other areas of your life, chances are good as long as it’s not too severe – you stand a good chance to be approved! This type of loan does have a limit – at time of publication, the loan limit is $425,000.
The U.S Department of Agriculture offers low- to moderate-income earners in rural areas an affordable mortgage option through their USDA loans program.
You don’t need perfect credit or funds from other sources, just your paycheck and some nearby collateral!
The Department of Veterans Affairs (VA) offers eligible veterans, current service members, and surviving spouses the opportunity to qualify for home loans through their veteran-specific program. Oftentimes no down payment is required.
Don’t Stress – Assess!
Homeownership is a great investment for your future financial well-being. If you have a lower credit score, it may require additional research when looking into financing options, and you’ll want to speak with a lender to assess your specific situation.
The benefits of homeownership can still be available even to someone with poor credit scores! Home buying isn’t always easy, but there’s hope – you just need patience and wisdom from knowledgeable professionals like us! We can recommend excellent, fair and thorough lenders who will examine your situation and give you helpful feedback, and assist you in creating a plan for your future homeownership.