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Last updated on December 5th, 2022 at 10:06 pm
Every American dream is owning a home, a permanent plot of land which you can call your own.
But, if you have a less than perfect credit score, this dream could be out of reach. However, finding a mortgage even with an imperfect credit score is still possible.
Is there a minimum credit score for mortgages?
Typically, for mortgage applications, there isn’t any requirement of a minimum credit score.
However, with recent government policy and business practice holds a threshold of around 620 credit score.
Lots of lenders have their own requirement of score acceptance limit. With each lender operating differently, it makes it hard to find the institution where you may qualify. Here are a few tips to help you secure a mortgage:
If your conventional mortgage application has been rejected by lenders don’t lose hope because there are many loan options available other than conventional mortgages.
Some of those loans are:
- FHA loans: This is provided by an FHA-approved lender and while an FHA insured loan doesn’t have a maximum income limit they are ideal for first-time homebuyers or low-to-moderate income borrowers. Because the Federal Housing Administration insures the loans it requires a small down payment (3.5%) and will frequently accept borrowers with lower credit scores.
- VA loans: a VA loan is a viable option for securing a home for present-day and former members of the military. They don’t require any down payment; and are partially backed or guaranteed by the Department of Veterans Affairs. The benefits are frequently made available to active duty or former members of the military with lower credit scores.
USDA loans: Like FHA loans, the USDA loans help low-to-moderate income individuals with low to moderately low credit scores to secure a home.
Your home must be in a USDA-designated suburb or rural location if you want to qualify for this loan.
Work to improve your credit
If you do not want a government-backed loan such as FHA, VA, or USDA, then improve your payment style, and boost your credit score.
Even if you can raise your credit score by few points, you can still benefit. Make consistent, on-time payments, and diversify your credit mix or lower your overall credit usage to take benefit.
Buy within your means
if you stay within your limits when buying a home then even with a bad credit score, you are less of a risk for the lenders.
Your income will be analyzed by the lender to see if you have reserves every month in case of some unexpected expenses.
Save as much as you can for a down payment, sometimes with private mortgage insurance, you can minimize your down payment shortage.
Reference Source: Your Valley
