Buying a home with a lower credit score

For many first time homebuyers, credit scores may be lower than they would like. Younger home buyers may not have a credit history to build a higher score.  Mortgages are still available to those with lower credit scores.

FHA requires a 580 score in most cases, some lenders may have a requirement of a 620 score. FHA allows you to use gifts for down payment and the seller can contribute towards the closing costs.  The monthly mortgage insurance will be lower for most with FHA than a conventional loan if you have a low credit score. All these items make FHA a great mortgage for those with lower scores.

USDA has a zero down program for homebuyers that are buying in rural areas, usually you need a minimum of a 620 score and you need to get an automated approval. The USDA guarantee fee is lower than FHA so it can be a good option for those buying in rural areas.

Conventional loans have some options for lower scores – the Home Ready program will allow you to buy with a score of 620 as long as you have an automated approval. The mortgage insurance will be higher than FHA but slightly lower than a regular conventional loan. Plus Home Ready and Home Possible only require 3% down and it can be gift money.

Talk to your loan officer and see what your options are. There may be a program that you can use today while rates are still low.

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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