Got poor credit? You may be able to get a home loan.
If you have ever tried to, you may know that getting approved for a home loan with bad credit is no easy task. However, if you are hoping to purchase property and have poor credit, all hope is not lost. Here are some tips to help you improve your credit and land yourself a great home loan that suits your needs.
Check your credit reports and scores
Checking your credit reports and scores early in your house hunt can give you a sense of which home loans are realistic options. However, most mortgage lenders will review your credit reports from Experian, TransUnion, and Equifax, as well as FICO scores based on each report. They typically use the middle score to help determine whether you get approved and to set your interest rate and repayment terms.
FICO® Scores range from 300 to 850, which are then divided into five score ranges:
Very Poor: 300 – 579
Fair: 580 – 669
Good: 670 – 739
Very Good: 740 – 799
Exceptional: 800 – 850
The higher your score, the more options you will have for credit, including home loans.
Work on improving your credit score
Building credit takes time, but it is worth it. Be sure that you pay off due debt every month, avoid taking out more debt, avoid opening any bank accounts, and work on saving for a large down payment. All this helps to improve your score and show lenders that you are able to take on the financial responsibility.
Look for other options
FHA loans allow borrowers to have just a 500 credit score or higher to qualify. This makes it possible for many buyers, especially first-time homebuyers with lower credit scores to qualify for a home loan. This type of loan allows for individuals to qualify for loans with scores as low as 500 with 10% down and scores of 580 with 3.5% down.
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