If you have a poor credit score, you may think it’s impossible to approve a mortgage to buy a house. However, you may still have options if your score is below average.
Minimum credit score for a mortgage
You can get a mortgage without a credit score limit, but the lower your credit score, the harder it will be to find a lender who will approve your loan. For conventional conforming loans, the minimum credit rating is usually considered 620, while government-backed loans tend to have lower credit scores but more flexibility.
However, many premium mortgage listings assume a credit score of at least 740 or higher. Credit scores typically range from 300 to 850, but can range from 250 to 900, depending on the scoring model for auto loans and bank credit cards.
FICO credit score
One of the most popular scoring models is the FICO score. Here’s how the population is broken down for FICO credits:
- 800-850 (excellent): 21%
- 740-799 (very good): 25%
- 670-739 (good): 21%
- 580-669 (fair) : 17%
- 300-579 ( bad): 16%
How to get your own home despite having poor credit
A low-credit mortgage or refinancing can be expensive, but it can be more attractive than paying rent for a house you don’t own. Here are some tips for getting a low-credit mortgage.
What to do – Research shows multiple offers that can save you thousands of dollars on a 30-year mortgage.
Think bigger than banks – Banks aren’t the only ones offering mortgages in town. There are non-bank lenders, online lenders, credit unions, and other lenders who want your business. Let them compete and see where you can get the best deal.
Look into Low Credit Mortgages – If you’re buying a home for the first time or qualify for a low-income mortgage program, you can go beyond traditional mortgages. So, if you qualify, ask the mortgage lenders for high-risk borrowers.
Find a co-signer – If you have low credit, you can ask a family member or friend with high credit to co-sign your mortgage. This can boost your application, but only if the co-signer is willing to take on the debt.
Check if you’re eligible for a down payment – If you’re looking to get a poor credit mortgage to buy a house, it’s a good idea to increase your down payment to help smooth out your credit. With over 2,500 down payment assistance programs nationwide, you may be eligible for any of them.
Do not make any new financial changes – Do not take out or apply for new debt during the mortgage application process, as new credit cards and large purchases can affect your credit score.
Beware of “Guaranteed” Approved Loans – If you see an ad that promises “guaranteed” approval of a mortgage regardless of your credit rating, it’s a red flag. Federal regulations require lenders to verify a borrower’s ability to repay their mortgages, so there is no “guarantee” if this is not done. These deals also offer guaranteed approval but at a steep price.
