Mortgages For People With Fair Credit
There is no greater expense for the average American than buying a home. And as you may know, your credit score can affect your financial future. So if you have great dreams of finally buying a home, but only an average credit score, is it still possible to apply and qualify for a home loan? The answer is absolutely, yes.
What is a Credit Score?
Your credit score is a three-digit number generated by a mathematical algorithm using information in your credit report, also known as a FICO credit score. A person has three FICO scores provided by three major credit bureaus, Equifax, Experian and TransUnion. FICO scores range from 300 to 850, where a higher number indicates lower risk.
How to Compensate for a Fair Credit Score
If you don’t want to wait until your credit score improves, you still can make your application more attractive to lenders in several ways.
- Make a Bigger Down Payment
- Increase Cash Reserves
- Reduce Your Debt-to-Income Ratio
Fair Credit Home Loans
Conventional Home Loan
Conventional loans conform to the loan limits set by Freddie Mac and Fannie Mae’s underwriting requirements. Requires at least a 620 credit score to qualify. With a 640 credit score, your down payment will be 25%. For smaller down payments, the minimum credit score increases to 680.
FHA Home Loan
An FHA loan is insured by the Federal Housing Administration (FHA). Borrowers with credit scores 580 and above can get a loan with a down payment as low as 3.5%. With a credit score between 500 and 579, the borrowers will need a down payment of at least 10%.
USDA Home Loan
A USDA loan is backed by the United States Department of Agriculture (USDA), and designed for eligible home buyers in rural and suburban areas. Most lenders underwriting USDA loans require a minimum credit score between 620 and 640 with no significant delinquencies, foreclosures or bankruptcies in the past several years.
VA Home Loan
The VA Loan is issued by approved lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). Designed for veterans, active duty military members and their families. Requires a 620 or higher credit score, while some may be able to work with a 580 score in certain situations.
A generally fair credit score ranges from 620 to 679. Today’s home loan rates are so low that even if you pay a little more for having a fair credit score, you’ll still be getting a historically good interest rate. To learn more about your fair credit home loan options, contact the Homestead Mortgage home loan expert Tim Barr today!