Buying a Home with Less Than Perfect Credit? You Got This! ????

Thinking about buying a home, but worried about your credit score holding you back? Don't sweat it! ?? In the past, lenders were pretty strict about who qualified for a mortgage -- things are a more flexible recently. Here's the scoop on buying a home with less than perfect credit

What credit score do you need?

This depends on the lender and the type of loan, but generally, a score of around 580 is a good starting point. This is the minimum score required for an FHA loan, which is a great option for first-time buyers. Some lenders may even allow scores as low as 500 with a larger down payment. ??

How does your credit score affect your mortgage rate?

The lower your score, the higher the interest rate you'll likely qualify for. A higher rate means a higher monthly payment, so it pays to work on improving your credit score before you buy a home. This could mean the difference between renting an apartment and owning your own place!

Easy Ways to Boost Your Credit Score

Before you do anything else, get a copy of your credit report and check for errors. A mistake on your report, like an old collection account that's been paid off, could be bringing your score down. You can get a free credit report every year from each of the three major credit bureaus: Experian, Equifax, and TransUnion. Just visit AnnualCreditReport.com to request yours. ?

Another cool trick is Experian Boost. This free service allows you to add utility and phone bill payments to your credit report, which can help improve your score. According to Experian, the average user sees a 13-point increase! That could be all you need to qualify for a better loan. ??

Should You Wait to Buy a Home?

It really depends on your situation. If you can fix your credit score quickly (within a few months) and it will make a big difference in the loan you qualify for, then waiting might be a smart move. Your lender can review your credit report and advise you on the best ways to improve your score.

On the other hand, if you're ready to buy a home and raising your score a few points won't significantly impact your interest rate, then there's no reason to wait. Just keep in mind that even a small difference in the interest rate can save you a ton of money over the life of your loan. For example, a half-point difference on a 30-year mortgage could save you thousands of dollars! ??

What's the Best Loan for Low Credit Scores?

An FHA loan is a great option for buyers with lower credit scores and smaller down payments. While the qualification requirements are more lenient, you will pay for this leniency with a higher interest rate and mortgage insurance.

The Bottom Line

Don't let your credit score hold you back from your dream of homeownership! With a little effort, you can improve your credit score and qualify for a mortgage. And remember, a real estate agent can be a valuable resource throughout the home buying process. We can help you find the right home, negotiate the best price, and guide you through the paperwork. Let's chat today!

Julianne Clark / Charter One Realty

www.julianneclark.realtor

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