Here’s How To Get A Mortage With A Poor Credit Score

Published On July 18, 2019 | By admin | Featured

Many dreams of buying their own home, but not everyone thinks they are qualified for a mortgage. While it’s true that buying a house these days is easier with the help of home loans, not all can qualify for one. Some fail to save enough cash for the down payment, while others can’t afford to pay for the monthly mortgage fees.

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But what about those who have poor credit scores?

When you have a poor credit score, it can be hard to find a mortgage lender who will approve your mortgage application. Thankfully, there are home loan programs made available to homebuyers who have bad credit.

Are you one of those aspiring homebuyers whose bad credit is stopping them from applying for a mortgage? Here are five mortgage loan options to consider and how to get approved for one.

VA Loans

For veterans looking for a good mortgage option, you can apply for a va loan in texas. This type of mortgage is for veterans and service members who can qualify for a VA mortgage. The good thing about a va loan in texas is that there is no minimum credit score requirement. While most lenders need their borrowers to have at least 620 credit score, you can still get approved if your score is 580.

Pros of VA Loan Pros

  • No down payment
  • Higher DTI ratio allowed
  • Refinancing option
  • Bankruptcy and Foreclosure advantage
  • No pre-payment penalty

Cons of VA Loans

  • Primary residence occupancy
  • Mandatory VA Funding Fee

FHA Mortgage

For those who have less than 600 credit score, you can apply for an FHA loan. Homebuyers who have 580 FICO score can get approved for an FHA loan as long as you can afford the 3.5% minimum down payment along with the other requirements. There are also lenders willing to approve your application if your credit score is between 500-579. You will need to compensate for the lower credit score by securing 10% down payment.

Pros of FHA Mortgage

  • Low down payment
  • Low credit score requirement
  • Small reserve funds
  • Flexible Debt-To-Income Ratio

Cons of FHA Mortgage

  • Lower loan limits
  • Property standard requirements
  • Mortgage Insurance Fees

USDA Loan

This type of mortgage has zero downpayment requirements available for homebuyers who can’t get a traditional home loan. This is perfect for moderate to low income homebuyers as this offers 100% financing to first-time homebuyers. You need a 640 credit score and above to qualify. If you failed to reach this minimum score requirement, you could pay down your credit balances before applying for a USDA Loan.

Pros of USDA Loan

  • 100% financing
  • Low fixed interest rate
  • Flexible qualifying requirements
  • No cash reserves required
  • No pre-payment penalty

Cons of a USDA Loan

  • Mortgage Insurance Fees
  • Income Limits
  • Geographic restrictions
  • Only allows single-family homes
  • Owner occupied only

Even if you have bad credit, you can still qualify for a home loan for as long as you can compensate on the other requirements. For some lenders and home loan programs such as FHA mortgage, you can qualify with less than 580 credit score by putting down 10% down payment. VA loans are an excellent option to choose if you are eligible for a VA loan. As for those in rural locations, you can qualify for a USDA loan. 

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