If you’re preparing to buy a home, you probably know that your credit score is important. Maybe you’ve already been turned down for a mortgage because of a low credit score. Or maybe you’ve recently pulled your credit report, only to realize that your credit is worse than you expected.
Don’t give up on buying a home yet! There are plenty of places to turn if your credit is too low to get a conventional mortgage. But first, you should figure out what lenders expect of your credit score, since you might be surprised to find that you may be able to buy a home with your current credit score.
What do lenders expect?
Lending requirements vary from one lender to the next, but they’ve generally become more strict since the subprime mortgage lending crisis in 2008. As a rule of thumb, though, you’ll need a FICO score of about 650 to get a conventional mortgage – and that’s on the low end.
Remember, the lower your credit score, the higher your mortgage rate is likely to be. This can have a dramatic effect on how much you pay for your home over time. So if you’re sitting on the mid-to-low end of the credit spectrum, you may want to look into some of these options, even if you qualify for a conventional mortgage.
Put More Money Down
Mortgage lenders look at a host of factors when deciding whether or not to lend you money. One of those factors is your credit score. But another factor is your down payment.
With some lenders, you may be able to offset a weak credit score with a higher down payment. With a bigger down payment, you’ll have more equity in your home, which means the lender takes less of a risk when lending to you.
If you’ve got a substantial amount of money in savings, but still have a fairly low credit score, consider applying for a mortgage with a community credit union, like First Financial. Often, these smaller entities operate under more flexible lending guidelines, so you can talk to a loan officer about your situation and maybe get a favorable result.
To speak with First Financial’s lending department, call us at 732.312.1500 option 4, and to learn more about our mortgages – click here.
Work With a Homeownership Counselor
There are some local and national nonprofits that offer homeownership counseling.
Nonprofits like these offer counseling to future homebuyers who need help raising their credit scores or navigating the homebuying process. It may take some time, but with the help of a credit and housing counselor, you can learn which steps to take to raise your credit score and apply for a home loan.
First Financial offers a free Home Buying and Mortgage seminar every year; stay tuned for our next one! To register for our upcoming free seminars, click on the event calendar tab at the top right of our website. All of our staff is here to help you, if you ever have any questions please don’t hesitate to stop into any one of our branches and see us!
Get Your Credit Score Up
You could also simply take the time to bootstrap yourself into a better credit score. Raising your score isn’t complicated, but it does take time, discipline and hard work. These steps can help get your credit score up so that you can qualify for a mortgage.
- Correct any errors on your report, especially late payments or collections accounts that aren’t recorded properly.
- Make all your payments on time. Late payments are the # 1 way to ding your credit score.
- Pay down revolving debt like credit cards. A high debt-to-credit ratio is another surefire way to lower your score.
- Wait it out. As long as you’re paying down debt and making payments on time, your credit score will eventually rise on its own.
Don’t forget to utilize all of our free online financial calculators located on our website too.
*Click here to view the article source by Abby Hayes of US News.