Many people are concerned that they will never enjoy the excitement of home ownership because they have some dings on their credit reports. If you or someone you know feels they don’t have good enough credit to purchase a home, they need to reconsider.
What are the Different Types of Loans?
There are many different types of loans, some that are for those purchasing a home for the first time, and other loans that can be obtained for those who may already own a home and are looking for different options.
Here are some of the different types of loans:
- FHA and VA Loans
- USDA Farm Loans
- Home Equity Loans
- Refinancing Mortgages Loans
- Reverse Mortgages (HEMC) Loans
- Jumbo Loans
- Construction Loans
- Zero Credit Score Programs
- 3% Down Loan Programs
- Programs for Credit Scores Down to 550
As you can see from the last bullet, even someone who has a low credit score can still purchase a home.
Purchasing a Home if You Have a Low Credit Score:
If you don’t have a perfect credit score, you may still be eligible to purchase a home. There are a lot of different factors that go into securing a home loan. While your credit score is a factor, it may also depend on the lender you use, where you want to purchase a home, how much you have to put down, and how much you are looking to borrow.
Here is some additional information:
- FHA often offers loans to homebuyers with credit scores as low as 550, but most mortgage lenders look for homeowners that have a minimum score of 620 for a conventional loan.
- Your credit score tells lenders about your risk of defaulting on a loan. Your credit score also shows your debt-to-income ratio and payment history.
- A good credit score shows the lender that you are responsible and typically pays bills on time.
- The higher the credit score, the lower the interest rate on your loan.
- Those with a credit score below 620 may still be able to buy a home, but in many cases, you will need to have more money to put down and have a higher interest rate than those with higher credit scores.
The best thing to do before you consider buying a home is to check your credit report. Make sure everything is accurate, and report back with information that is incorrect so the report can be properly updated.
High Risk Loans:
According to Investopedia.com, many companies will consider giving loans to those with less than stellar credit. In many cases, the best choice is to go to an independent home loan broker, who may be able to get you into a home or work with you to raise your score before you begin shopping around for a mortgage.