- August 31, 2016
- Posted by: Michael Meyer
- Category: Connecticut
“I Have a Low Credit Score: Can I Still Get a Mortgage?”
Are there low credit score mortgage programs out there? Just because you don’t have a high credit score doesn’t mean you can’t refinance or purchase a new home. Lenders are becoming less strict about credit scores and are offering loans to people with low scores and blemishes in their credit history.
Understanding Your Credit Score
A FICO credit score is a number, between 300 and 850 that summarizes your credit worthiness. The higher your score, the better the mortgage rate and term a lender will offer. That’s because lenders believe borrowers with higher credit scores are more likely to be able and willing to repay a loan. Most lenders require at least a 620 to 660 score, but there are some exceptions.
740 and higher = excellent
661 to 739 = good
601 to 660 = fair
501 to 600 = poor
500 or lower = bad
Low credit score mortgage programs do exist. A good option though is to attempt to raise your present score. One of the fastest ways to improve your FICO credit score is to pay down your credit card debt, or even pay it off entirely. The change can be reflected on your credit report within a month and can quickly change your score. You can check your credit report for free once every 12 months at www.annualcreditreport.com.
FHA will allow borrowers to have fico scores below 600 and can even have had a bankruptcy as long as it is over 2 years old. You can also have small charge-offs and judgments but typically need to be paid before you are able to close.
FHA also has second chance programs for those who had bankruptcies and foreclosure due to loss of job or income. You will need to document the events leading up to the event and show at least a 20% drop in income. You may be eligible to buy a house or refinance after just 12 months.
USDA is a 100% purchase programs that will allow borrowers to have credit scores as low as a 640 and in some cases 620. This program also allows for minor blemishes on credit, although you may have to pay off collections and judgments before closing.
VA loans are for veterans and are 100% loans for either a purchase or a refinance. In some cases, scores can be as low as a 580. If you are looking to refinance your VA loan, you may not even need to have an appraisal.
Call or email me and we can figure out which loan program works best for your specific situation. I would be happy to help you refinance or purchase a new home. Remember, there are low credit score mortgage options available.
Senior Vice President of Northeast Financial
210 S. Main St Middletown, CT 06457
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