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Mortgage Options For People With Bad Credit
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While this seems great, it may not be easy to access it if you have a bad credit score, so this article is meant to guide you if you belong in this category.
While this seems great, it may not be easy to access it if you have a bad credit score, so this article is meant to guide you if you belong in this category.
Why You Should Avoid a Bad Credit Score
Every person wishes to own their home as the benefits that come with it cannot be overemphasized. You will no longer have to deal with rents or worry about neighbors messing up your yard.
Hence it is no surprise that a lot of people are going the mortgage way. With a great mortgage plan, you can get the home of your dreams without having to provide the cash needed upfront. All you have to do is get a nice option and pay within 25 years while you enjoy your home.
Nevertheless, while the mortgage option is really an effective plan, you will barely get it if you have a bad credit score. For lenders, the risk is a bit too high, and they do not enjoy having to evacuate a defaulting borrower and sell the home, so they avoid lending to such borrowers entirely.
A bad credit score is between 350 to 579 out of a peak 850 on the FICO 8 scale. If you fall in this category, it is almost impossible to get Help with Paying Home Mortgage Refinance Options or any mortgage at all. In fact, to stand a real chance of getting a mortgage, it is recommended you have a credit score of 680 and above.
You may feel there is no hope with the above scores, but there is a way around it. You can get a mortgage option even with bad credit, and this article will provide you with these options.
Mortgage Options to Consider with Bad Credit
Some of the loan options considered in this section require a percentage of down payment which the lenders believe will make you commit to paying your loans.
1. FHA Mortgage
Minimum credit score: 500
Suited for borrowers with credit scores within the ranges of 500-620
Requirements:
500 credit score requires a 10% down payment of the total loan
580 credit score requires a 3.5% down payment of the total loan
This mortgage option is backed by the Federal Housing Administration (FHA) and is the best option you can get as a lower score is not synonymous with higher interest rates.
2. VA Mortgage
Minimum credit score: 580 – 620
It is designed for eligible veterans and seniors who have served in the military and their spouses. With this loan option being backed by the Department of Veterans Affairs, no down payment is required. Generally, there is no minimum credit score, but lenders tend to give loans to applicants having a credit score of 580 – 620.
3. Conventional Loans
Minimum credit score: 620
This the best mortgage option for low to moderate-income borrowers and does not require any down payments. The interest rate is dependent on credit score as it is a non-government loan. The lower the score, the higher the interest rates.
Fannie Mae and Freddie Mac are the agencies in charge of administering the majority of conventional loans in the U.S.
