Sometimes life takes unexpected twists and turns, and these changes can result in not having the ability to stay current with your bills. Over time, this situation could lead to a lower credit score, and while that might not affect a renter, it’s a big deal for someone who wants to purchase a luxury or waterfront home.
Rather than giving up on the dream of home ownership in Bay Head or surrounding ares, there are many programs available to assist those who have had to overcome challenges with their finances. Let’s explore a few options for home ownership even with a low credit score.
Different Scores For Different Programs
There are many mortgage programs available to help those with less than perfect credit, but two in particular are very popular and easy to work with. The first is through the Federal Housing Administration and is called the FHA loan. This loan is suited for first time homebuyers who don’t necessarily have an immense amount of financial resources. It requires a smaller down payment as well as a lower credit score requirement. Depending on the company you work with, applicants need to meet very basic score requirements and can sometimes be approved with scores as low as 550.
Another great option is the loan program offered through the United States Department of Agriculture, which is termed the USDA Rural loan. This mortgage program encourages people to purchase homes in rural areas and incentives them by offering easy-to-meet application requirements. Technically, there is no minimum score required for this loan, yet most applicants find that they need around a 640 score to be approved.
Keep in mind that the lower your credit score is, the more of a risk you appear to be in the eyes of the lenders. While loan processors do take certain circumstances into consideration, like job loss, they ultimately want assurance that you will make your payments each and every month. As a result, homeowners with lower credit scores find that they usually don’t get the lowest interest rates out there.
Working To Improve Your Score
If your score is too low to be approved or the interest rates are too high, consider taking some time to repair your credit before applying for a home loan. While it can take some effort, there are some relatively easy ways to raise your score to a desirable number.
First, make sure that payments are made to creditors on time every month. Once accounts start to lapse, this information shows up on a credit report and can harm your score. Maintaining a decent amount of available credit is another factor that contributes to your score and gives mortgage lenders an idea of how responsible you are with money. If every credit card you have is always full, it might indicate some problems.
When shopping for a home loan, lenders will tell you not to open new lines of credit during the process. This could be anything from opening a new credit card account to buying a new car, but the advice is very solid. Once your financial picture is set in place, it’s best not to make any changes until after being approved for a loan.
Don’t Let A Low Score Stop You
Many people have been able to successfully purchase homes with affordable payments even if they have lower than normal credit scores. Oftentimes it takes working with a lender who really wants to fight for you and who can explain your situation in such a way that gives banks the confidence to extend a line of credit. Even if your score is low, don’t let it get in the way of buying the home of your dreams!