If you have bad credit, it may seem like buying a home is out of reach –or at least a couple of years away. But, in reality, struggling credit may not be as much of a roadblock as you may think!
If you have less than ideal credit and have the goal of buying a home in 2020, then this article is for you! We’ve helped countless homebuying hopefuls reach their dream of buying a home and we can help you too.
Read on to find out more about loan programs for low-credit home buyers as well as how you can improve your score to qualify for a lower interest rate.
The Truth About Bad Credit and Mortgages
Technically, there isn’t a specific minimum credit score to qualify for a conventional loan. Lenders will set their own requirements since they are the ones that are loaning the funds. As you can imagine, they prefer higher scores as that means less risk.
Government-backed loans work a little differently as they ensure lenders that their funds will be reimbursed should a borrower with low credit default.
But even then, there are limits as to how low is too low. Generally speaking, a credit score of less than 500 might be too low to get a loan now. If this is you, focus on increasing your score first.
What is Bad Credit?
Again, there is no set range but this is the standard most go by:
300-579 Very Poor
740-799 Very Good
Best Home Loans For Home Buyers With Poor Credit
An FHA loan is a government-insured loan. This loan is specifically for first-time homebuyers as well as those that haven’t purchased a home in the past 3 years. The minimum qualifying score is 580. However, if your down payment is at least 10%, you may qualify even if your score is below 500.
There are additional requirements for getting an FHA loan. But even then, it is still one of the most popular mortgage products for those with struggling credit.
If you’re an active-duty member of the armed forces or a veteran, then you may qualify for a VA loan. A VA loan is also a government-backed loan, however, it’s funded by the Department of Veterans Affairs. Besides the perk of allowing you to qualify with a lower credit score, you can buy a home with $0 down!
Just like FHA loans, there are requirements for qualifying. Contact us for more details.
A USDA loan is yet another government-backed loan. However, this one is backed by the U.S. Department of Agriculture.
Just like the previous loans, a USDA is great for home buyers with low credit scores and best if you want to buy a home in a qualifying rural area. It also has a $0 down option!
Improving A Bad Credit Score Fast
Here are some ideas for improving your credit score fast.