- November 7, 2018
- Posted by: Michael Meyer
- Category: Connecticut
“I Have a Low Credit Score: Can I Still Get a Mortgage?”
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 for those with a low credit score.
740 and higher = excellent
661 to 739 = good
601 to 660 = fair
501 to 600 = poor
500 or lower = bad
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.
The FHA Option
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 a low credit score mortgage options called the Extenuating Circumstances Program. This is for those who have had bankruptcies and/or a 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.
Call or email me and we can figure out which loan program works best for your specific situation. I would be more than happy to help you refinance or purchase a new home. A low credit score doesn’t mean you are out of options.
Senior Vice President of Northeast Financial
210 S. Main St Middletown, CT 06457
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