Fixing Credit to Buy a House

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Did you know that over 11% of US consumers are wrestling with a poor FICO credit score? The sting of this statistic may sharpen as the financial aftermath of COVID-19 deepens. If you find yourself among this 11%, you may ask, "How can I fix my credit to buy a house?" While your choices may be limited, there are always alternatives to investigate. Interestingly, countless Americans either have a low credit score or no credit score at all. Moreover, according to a 2020 survey, many need to be made aware of their credit standing!

Repairing Your Credit for Your Dream Home Purchase

Imagine this - your credit score is your golden ticket to securing a mortgage or loan. However, no magic number promises surefire approval as lenders set their unique criteria. A lower score might limit your options and mean you're splurging more on interest.

Curious about where you stand? Here are the FICO score ranges typically used by lenders:

Credit Repair Table Showing the Best Mortgage Rate Scores to Buy a House
  • Sub 580: This score might make lenders raise an eyebrow, considering it a high risk.
  • 580 to 669: Your score is in the fair range, below average, but don't fret - it should still be enough to secure that crucial loan.
  • 670 to 739: You're in the good zone! Most lenders will give a nod of approval to your creditworthiness.
  • 740 to 799: You're doing great with a very good score, showcasing your responsibility as a borrower.
  • Above 800: Kudos to you, an exceptional borrower! Your excellent score is a testament to your stellar credit management.

Did you know that over 90% of top lenders make decisions based on FICO scores? Fascinating, right? Now, the minimum credit score for home loans can be a moving target, changing from lender to lender. So, is it wise to aim for a 'good' credit score of 670 or above to keep all your borrowing options open? But here's the kicker - even if your credit could be better, buying a house is still within reach. It's indeed possible to buy a home even with bad credit!

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Exploring Your Mortgage Possibilities

Let's delve into the various options with differing credit scores available.

  • No credit score – Are you a service or military personnel with no credit score? Don't fret. VA loans are designed for you and don't require a minimum credit score. For others, a non-QM (non-qualified mortgage) might be your ticket to homeownership.
  • 300 to 500 – Is your credit score between 300 and 500? While we suggest boosting your credit score first, there are still routes for you. Consider options like a non-QM loan, as mentioned earlier.
  • 500 to 579 – Do you have a credit score between 500 and 579? If so, your path to owning a house might be an FHA home loan. These loans require a 10% down payment and come with the backing of the Federal Housing Administration.
  • 580 – 619 – If your credit score lies between 580 and 619, you're in luck. You can secure an FHA loan with just a 3.5% down payment.
  • 620+ – Got a credit score of 620 or above? You have the green light to apply for a conventional home loan or mortgage. You can opt for loans adhering to Fannie Mae and Freddie Mac standards with a mere 3% down payment. These are the go-to mortgage types in the US, funded by private lenders such as banks, credit unions, and mortgage companies. USDA loans also fit into this category, benefiting those eyeing rural homes.

What's the Secret to Mending My Credit Before I Dive into Homeownership?

Are you finding yourself in one of the lower credit-score brackets and questioning how to boost your score as quickly as possible to buy a house? Rest assured; there are several strategies you can employ:

  • Are you thinking about how to diminish credit card debt? Aim to clear as much of your credit card dues as your financial situation allows. Remember, maxed-out credit cards are a red flag for your credit score.
  • Do you need help with improving your payment history? Start by paying your bills on time. Can't manage that? Have a chat with your lenders to explore alternative arrangements. Remember, late payments can haunt your credit records for a minimum of seven years, but the negative impact lessens gradually.
  • Ever thought about using a credit repair service to fix your credit for home buying? It's a great way to help you check credit reports from the big credit bureaus (Equifax, Experian, and TransUnion) and challenge incorrect information. If the formalities don't intimidate you, consider building your credit yourself with DIY tips.
  • Have you heard of rapid rescoring? Some mortgage lenders offer an updated version of your credit score within just five working days. It's much quicker than the usual monthly refresh of credit scores. Rapid rescoring could work in your favor if you've been making timely repayments recently.
  • How about taking out a small loan and repaying it? It's an intelligent way to establish a recent history of repayment. Just be cautious about applying for multiple credit accounts within a few weeks, as it could hurt your score. However, if you collect loan quotes within 14 days, it'll only count as one inquiry.

Purchasing a Home Despite Credit Challenges

Have you ever wondered if a credit score 500 could get you a home? Believe it or not, it's the minimum qualifying threshold for an FHA loan, provided you can make a 10% down payment. But remember, often purchasing a house with less-than-stellar credit requires extra financial resources. Can you relate to the struggle of having a poor credit history? Don't worry. The FHA provides credit counseling and first-time home buyer advice.

Curious about which US lenders are willing to offer a mortgage even if you're working with a lower credit score? Let's dive in.

You can get mortgage solutions, even with a credit score below 580. Here are some options:

What if you've worked hard and boosted your score to 580? Good news! More options open up:

  • CitiMortgage is a solid option for those with a minimum score of 580.
  • Navy Federal Credit Union is a reliable choice for those with a credit score of at least 580.
  • New American Funding is an excellent choice for homebuyers, with a minimum score of 580.
  • PNC welcomes homebuyers with a credit score of 580 or above.
  • Quicken Loans is a popular option for those who have a minimum score of 580.
  • Rocket Mortgage can rocket you toward your dream home if your score is 580 or more.

Have you ever wondered about the minimum credit scores needed for different mortgage types? Well, for FHA loans, it's a different story. But typically, other mortgages demand a score of 620 or more. How does your credit score stack up?

21-Point Credit Score Increase

See How My Team & I Can Get You a 700+ FICO Score & Access to $100k in 90 Days

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Let's put it into perspective. Average American consumers have a credit score ranging from 680 to 700. Not too shabby.

And here's an interesting tidbit: 2020 saw the average credit score soaring to an all-time high of 711! How did that happen during a pandemic? Here's the secret - it was buoyed by coronavirus financial assistance from the government. Notable.

Is Purchasing a Home Possible with Zero Credit?

Have you ever wondered how to overcome a low or non-existent credit score when aiming to buy a house? One option is to consider non-QM loans. Surprisingly, these loans require a down payment of 20% to 35% of the house's value, which might seem like a hefty sum. But why is this?

With a low score, you're considered a higher risk to lenders. You've shown in the past that there might be some repayment issues. But don't worry; there's a silver lining! A higher down payment can offset that risk. It shows the lender that you are serious about this purchase. Interesting, right?

And for those without a credit score, you're not off the hook. You might also need to make a substantial down payment. Why? Because without a credit history, lenders cannot gauge your reliability as a borrower. But remember, this larger down payment demonstrates your commitment and reduces the lender's risk. It's a win-win!

Did you know establishing a FICO credit score takes at least six months? However, having a thin credit history is only a notch above having none. Think about it, how does living debt-free help in building your credit history? It doesn't, right? But here's a pro tip: even if you do not need loans or credit cards, their careful usage can significantly improve your credit score. Quite insightful.

Ever thought about what it's like to buy a house with no credit history? It's not a walk in the park, that's for sure. With limited options, you face steeper interest rates. But don't let that discourage you! 

It's essential to consider the long-haul cost of your loan offers. Ask yourself: Am I on the verge of improving my credit score? Could there be significant changes in my life soon? Weighing these factors against each other is crucial in your journey to credit repair for home buying.

What's the Ideal Credit Score for a First-Time Home Buyer?

Are you a first-time home buyer? Like everyone else, you're subject to the same credit score regulations. You may be young or need a substantial down payment saved up. In this case, a credit score of 580 is what you'd aim for to secure an FHA loan. What if you have a credit score of 680 or higher? You're in luck! You can apply for a conventional home loan, possibly with a minimal down payment, and enjoy a lower interest rate.

You can dodge that pesky monthly mortgage insurance premium if you can afford a 20% down payment. It's just one of the additional costs you should consider when planning to buy a house. But wait, there's more! Many first-time buyers might not give their credit score the attention it deserves when applying for a mortgage. So, what should you be thinking about?

Let's dive in:

  • Ever wondered what you can genuinely afford when buying a house? A mortgage pre-approval provides clarity for first-time buyers. It's based on your credit score and is a positive step for lenders.
  • Thinking about making a big purchase like a car before applying for a mortgage? Think again. Lenders take into account your expendable income and credit history. Avoiding major credit-dependent purchases is best to ensure a smooth mortgage application process.
  • Are your credit cards close to their limits? That could be a better look. Aim to use at most a third of your available credit. Hitting the limit may signal financial stress or lack of discipline to lenders.
  • Spotted inaccuracies on your credit file? Don't let them hamper your home-buying journey. Just do it yourself to dispute the errors with the credit bureaus or delegate the task to a credit repair consultant. They'll work on your behalf to clear up any discrepancies.
  • Need clarification on your current credit score? As a first-time home buyer, it might be worth your while to wait and work on improving it. A higher score could unlock more attractive mortgage offers. Buying a house with bad credit should always be your last resort.
21-Point Credit Score Increase

See How My Team & I Can Get You a 700+ FICO Score & Access to $100k in 90 Days

Fix or enhance your credit. See real results quickly.


Common Questions About Fixing Credit to Buy a House

Can a low credit score still land you a home loan for a mobile home?

It could be more straightforward. Mobile homes, unlike traditional homes, are often regarded as personal property unless you also own the land they sit on. As such, they typically are financed via CHATTEL MORTGAGES rather than conventional FHA loans. These chattel mortgages, or chattel loans, generally have shorter repayment periods and higher interest rates.

Can you still finance a mobile home with less-than-stellar credit?

Yes, you can! Consider the 21st Mortgage Corporation, which provides chattel mortgages in 46 US states. They welcome borrowers with credit scores below 570. However, be prepared to make a 35% down payment in cash, trade, or land equity.

Curious about the credit score you need to build your own house?

Typically building your dream home requires a construction loan. Lenders usually prefer a credit score range of 680 to 700 for this riskier type of loan. But don't despair if your credit score isn't quite there. Companies like FMC Lending offer construction loan programs even to those with bad credit. Remember that the down payment for such loans typically falls between 20 to 30%, although equity-based deals are also an option.

What are the Covid-19 effects on the credit score requirements for home buying?

We live in unpredictable times, and it's hard to say how mortgage providers will adapt due to the pandemic. They might favor those with higher credit scores. So, if you're considering buying a house soon, now is a great time to start repairing your credit.

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