We invited Lisa Dilemme, a Federal Standard Abstract trusted title professional to explain how you can get a mortgage even if your credit isn’t in the best shape.
Imagine you’re almost at the front door of your dream home, feeling all cozy and excited. But oh no, your credit score is not as good as you’d like it to be. Don’t worry – we are here to help you figure out how to still get a loan so you can buy that awesome house that you really want.
Think of your credit score like a report card that banks look at to decide if they can give you a loan. If your score isn’t super great, getting a loan might be a bit hard, but don’t panic! There are ways to make things better.
Your credit score has a big impact on whether you can get a mortgage or not. If your score is high, lenders see you as someone who pays bills on time and doesn’t borrow too much. But if it’s low, lenders might worry that you have had trouble in the past dealing with money.
Regular loans usually require a credit score of 620 or more. But for loans backed by the government, you can usually get by with a score of 580. But this depends on the type of loan you are applying for.
Regular Loans
These are common loans, and they usually need a score of at least 620.
Government Backed Loans
FHA Loans, these loans are supported by the government. Which for people buying their home for the first time is a great option. You can even get one with a score as low as 580, and some banks would even accept 500 if you willing to put more money down upfront.
Veteran Loans (VA Loans)
If you’re a veteran, you might get a VA loan with a score of 580 or above.
Having a higher credit score means more lender choices and lower interest rates. If your score is on the lower end, it’s a good idea to work on improving it before you apply for a loan.
If your credit score isn’t great, here are some things you can do to make it better:
Build up your Credit
Pay off some of your debts or ask the bank to let you borrow more money. This can help make your score higher.
Create credit history by opening up new accounts
Open new bank accounts and manage them well. This can make your credit history and credit mix better.
Pay Off What You Owe
If you owe money, pay it back. Sometimes you can even ask to have the serious stuff taken off your record.
Don’t Ask for Too Much Credit
Applying for new loans or credit cards can hurt your score. So be careful.
Find a co-signer
If a friend or family with a better credit score agrees to help you, it can be much easier to get a loan.
Remember, if your credit isn’t perfect, it doesn’t mean you can’t buy a home. You can still get a loan, especially if you look within government backed options. Just take your time, explore your choices, and make sure you understand how much you have to pay back before you decide what to do.
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