Best Mortgage Lenders for First-Time Buyers with Low Credit Score
Credit score plays an essential role in the process of home buying. This is how most of the lenders determine your capability to borrow the loan and pay back afterward responsibly.
A high credit score will not only let you allow yo have best loan options but with this, you get various other options of the mortgage. If your credit score is low, you might be unable to get the loan easily.
This can lead to a problem for today’s first-time house buyers as most of the people now have a low credit score as compared to the people of the previous generation of the same age. If you are in the same situation, don’t worry as you can still be the owner of a new house.
Different kinds of loans for low credit:
To know about your loan qualification, creditworthiness and interest rate, a lender might look at your FICO score. The scores are based on factors like:
1. How much amount you own
2. History of payment
3. Credit types
4. Length of credit history
5. New credit
Getting information from major bureaus, FICO gives individuals a credit score between 250-850. When knowing if the borrower is qualified enough for the loan, lenders take a look at credit scores as well as other factors, like salary, debt-to-income ratio.
Here are the minimum credit scores needed to have for various mortgage types:
1. 580 for FHA loan
2. 620 for a conventional loan
3. 640 for Quicken Loans
You must know that there are various other factors to consider to get a loan and not only the credit score. If your credit score is less, there are still options available for you that you may try.
1. VA Loan:
If you are a member of the military, you can easily get VA Loan with fewer requirements of qualification like no down payment, no payment of mortgage insurance and higher DTI allowance.
No standard credit score is needed to apply for a loan with VA Loan but some of the lenders will keep the numbers in mind. No down payment is required to do in VA loan and also no mortgage insurance is necessary, instead, you can just pay one-time funding fee that will be paid back to you at the time of closing or can be adjusted in the loan.
2. FHA Loan:
This loan offers lower down payment options and also havea requirement of lower qualification as far as the DTI and credit is concerned.
With FHA Loan, you can apply for the loan even if your score is below 580. To qualify for this, you must have less DTI ratio. FHA Loan allow you to have a higher ratio of DTI as compared to the conventional one.
Knowing about the lenders is one of the top things to do while applying for a loan for first time home buyers. It is imperative to know each lender have different standards of qualification.