Sometimes life throws you a curveball that no one could anticipate, and a bad credit score is one of the many curveballs.
Mortgage rates are rising. Having a low credit score today could result in your mortgage getting declined, really bad timing, especially if you’re in desperate need of a mortgage.
Tackle this problem
One of the key steps is to identify what is classified as “bad credit”, which, as defined by Experian, is a FICO credit score less than 580.
You’ll have some extra hoops to jump through between 620 and 740, too. In general a credit score of 620 is the cutoff for most lenders.
This does not mean that there is nowhere left to go with bad credit
With poor credit, getting a mortgage is possible, but usually through special programs or unconventional means and is not without some extra effort.
One way to get a mortgage is through private lenders, though it is less desirable due to a higher down payment along with higher interest than an institutional lender.
Another method of getting a mortgage is through a government-backed loan, which negates the need for a large down payment while lowering the credit score cutoff to 500.
This path while usually more desirable than private lenders requires you to pay a mortgage insurance premium for this loan, and the maximum value for this loan is $679,650.
If none of the above options seem appetizing to you, you can make up for your bad credit with a larger down payment. For example, offering a 20% down payment puts you at a low enough risk that lenders may consider the loan.
Another procedure is by lowering your debt-to-income ratio or enlisting a co-signer, the latter of which is fairly difficult to attempt and best understood by speaking with me before taking this route.
There are also many tools available to help bring a credit score up. Everyone has a different circumstance and I am always happy to discuss to options available to you.