So you want to buy a new house but your credit score isn’t great? Don’t fret. There still may be a way for you to get approved. You may not have to skip out on the morning Starbucks runs to pinch pennies.
You might be in a situation where your credit was affected by something out of your control or a poor decision. There are still options for you.
We’re going to dive into some of the options a little bit, but before you explore any you should consider having all your ducks in a row. You should know things like how much you are actually going to get for your current home by using something like a seller closing costs calculator. This way you know how much you will really need to take out on some of the types of loan options available.
Conventional Loans
Conventional loans aren’t backed by any government agency. Typically you’ll need at least a credit score of at least 620 to be qualified for a conventional loan.
Although you may have a bad credit score, that doesn’t mean you’re in a poor financial situation. If you have a decent household income and can come up with a higher down payment, you will have a better shot at getting approved for a conventional loan with a credit score under 620.
FHA Loans
FHA loans are designed for first-time home buyers or people who haven’t purchased a home in at least three years.
The good news, the minimum credit score is usually around 580. If you can put at least 10% down on the home, that could come down to as low as 500.
If you’re looking to buy a home to fix and flip or rent out, don’t think about it with an FHA loan. These loans are for permanent residence only.
VA Loans
This is for the veterans out there or members of the armed forces. If you are, you should definitely look into a VA loan, especially if you have bad credit.
A VA loan will require $0 down. There is also no minimum credit score, but you should still be in the 550 range to play it safe.
USDA Loans
This is another loan backed by a government organization, this time the Department of Agriculture.
You have to make sure the area you are looking to buy a home in qualifies though. USDA loans are only open to certain rural areas. Like a VA Loan, you will need $0 down.
Most lenders require a credit score upwards of $600 with some income stipulations.
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