Buying a Home With a Low Credit Score

Buying a House With Low Credit Score
Buying a House With Low Credit Score

Are your credit scores not the greatest in the world? Are you interested in purchasing a home but not sure if you’ll be able to in your current financial situation?

One of the more common questions from prospective buyers is what credit score is necessary to buy a house? A low credit score can make it more challenging to buy a house.

That doesn’t mean you won’t be able to buy, but you won’t get the same favorable terms and conditions other borrowers get. It makes working on improving your credit scores a valuable exercise.

Without question, your credit scores can impact your ability to purchase the house you want.

Let’s explore the necessary steps to get a mortgage with a low credit score.

Check Your Credit Score First

First and foremost, you should check your credit score. Several credit monitoring agencies offer free scores.

Having a good credit score will help you get a lower interest rate on a mortgage, access to better financing options, and avoid being denied altogether.

Only Use Good Credit Bureaus

Don’t use any less reputable or less reliable credit bureaus to check your score because they may give you an inaccurate reading.

Use only the three major agencies – Experian, TransUnion, and Equifax – that are accredited by the National Foundation for Credit Counseling (NFCC).

You can get your credit score and history from each of the three credit bureaus by visiting their websites: Experian, TransUnion, and Equifax.

Check Your Credit History

Your credit history is also important when it comes to buying a house.

A good score will show that you’re a responsible borrower and have been able to keep up payments on past loans.

A bad score could lower your chances of being approved for a mortgage or result in a higher interest rate on your approved loan.

Be Prepared To Show Good Documentation

In order to prove that you’re qualified to buy a house with a low credit score, you’ll likely need to provide documentation such as pay stubs, bank statements, and investment records.

Get a Good Mortgage

Once you have checked your credit score, your next step is to get a good mortgage.

A mortgage with a low-interest rate is more likely to be offered to someone with a good credit score.

There are many different types of mortgages available, so it’s important to find one that meets your needs.

Some things you may want to consider when selecting a mortgage include the interest rate, the terms of the loan, and whether or not you will need to make any down payments.

Compare Lending Institutions For Loans and Rates

Before you sign any papers, it’s good to compare lending institutions and rates.

You can do this by visiting the websites of several different lenders and selecting the one that has the best deal for you.

Since you have a low credit score, you’ll probably need to fit into a custom-tailored mortgage program to your needs.

An FHA mortgage is often an excellent place to start as they have lower credit score requirements than some other mortgage programs.

Speak to your mortgage broker or loan officer to see if they agree it would be the best program.

Gather Your Mortgage Documents

Once you have selected a lender and made your mortgage application, you will need to gather the following documents:

  • Your pay stubs from the past two years.
  • Your bank statements from the past two years.
  • Your investment records for the past two years.
  • A copy of your credit report – the lender will require a credit check and report.
  • A copy of your income tax return for the past two years.
  • Your driver’s license or other government-issued photo identification.

Get Pre-Approval For Your Home Loan

Getting a Mortgage Preapproval
Getting a Mortgage Preapproval

When you choose your lending institution, you’ll want to get a pre-approval letter. The preapproval letter will show the home owner you want to purchase that the chances are excellent you’ll get the loan.

Most real estate agents won’t even consider an offer on a home today without an accompanying preapproval letter. Some agents also prefer to see the letter come from a reputable lending institution.

Going to a no-name lender is probably not a good idea when trying to secure a home you love.

Apply For Your Mortgage

Once you have all of the required documents, apply for your mortgage.

Be sure to provide accurate information on your application and be prepared to answer questions about your finances.

How to Improve Your Credit Score

Even though you are already applying for a loan, you should be working toward improving your credit standing. By improving your credit score, you can refinance at some point in the future into more favorable terms.

There are a few things you can do to give your credit scores a boost:

  • Make on-time payments on your debt.
  • Keep a good credit history.
  • Don’t apply for another significant loan if you have less than stellar credit.
  • Keep credit card balances to a minimum.
  • Sign up for a credit improvement service such as Credit Karma or Credit Sesame. Both are excellent companies that can speed up improving your credit standing.

Final Thoughts

A low credit score does not mean you cannot buy a house. While there are minimum credit scores, they are not that difficult to attain. Even if you have terrible credit, you can get your credit scores increased by putting in some effort.

Understanding the credit score needed to buy a home will be the first step. Never underestimate just how impactful having better mortgage terms can be.

When you buy a house, the purchase price is not what you are paying for the home. What you end up paying over the life of the mortgage is what it really costs. Keep this in mind when improving your scores and doing a refinance. It is a nice goal to remember.


About the author: The above article on “How To Buy A House With A Low Credit Score” was written by Bill Gassett. Bill has been working in the real estate industry for the past thirty-three years. He works for RE/MAX Executive Realty in Hopkinton Massachusetts. Bill loves providing trustworthy information to buyers, sellers, and fellow real estate agents to make the best possible decisions. His writing has been featured on RIS Media, National Association of Realtors, Inman News, Placester, Today.com, Credit Sesame, and others.


About Rochester’s Real Estate Blog: Rochester’s Real Estate Blog is owned and operated by Kyle Hiscock of the Hiscock Sold Team at RE/MAX Realty Group.

Since being launched in 2013, Kyle has published more than 150 quality, in-depth, and unique real estate related articles on the Rochester Real Estate Blog pertaining to topics varying from home selling to mortgages and everything in between!  In addition to quality real estate related content, there are also many quality articles pertaining to the Greater Rochester NY area.

The Rochester Real Estate Blog has been recognized by many reputable websites as one of the best real estate blogs to visit and follow!  In addition to being recognized as one of the best real estate blogs, Kyle has been recognized as one of the top Realtors on social media by several organizations and websites.

With over 40 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.

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