Many people mistakenly believe that a low credit score automatically disqualifies them from any financing options to help them buy a home. But everyone—and we mean everyone—makes financial mistakes, the catch being that some people make bigger money blunders than others.
When you miss payments, default on loans, or make financial miscalculations, your credit score takes a hit, which in turn, affects your ability to qualify for home loans. Still, you have some mortgage options left, a few of which are listed below.
FHA Loans
To get approved for a conventional mortgage, you need to have a credit score of at least 620 to 640, making it next to impossible for people with credit problems to qualify for a home loan. This is where the FHA Mortgage comes in.
Created in in 1934 by the Federal Housing Administration to increase home ownership in the United States, FHA loans are insured by the federal government, allowing lenders to provide lenient loan terms. In fact, people with credit scores as low as 500 can qualify for an FHA loan with 10 percent down and a 580 score with 3.5 percent down.
USDA Rural Development Loans
The USDA Rural Development home loan program is another little-known mortgage program designed to encourage home ownership in the rural parts of the United States. Created by the U.S. Department of Agriculture, these rural home loans are targeted to towards low- to moderate-income households.
While the “rural” name may make it sound like you can only apply for loans to buy farms or homes in the middle of nowhere, the truth is that more than 90 percent of all land in the United States is a USDA-eligible location. So, you never know if a property you’re looking to buy is USDA eligible.
Perhaps the best part of USDA home loans is that they require zero down payment. For this reason, USDA mortgages require slightly higher credit scores, with most lenders looking for a 640 score.
VA Home Loans
The U.S. Department of Veterans Affairs offers low-cost VA home loans to veterans, active military service members, and even the surviving spouses of veterans.
VA loans have several benefits; for starters, you don’t have to pay a down payment or mortgage insurance fees. The VA doesn’t even set a minimum credit score to qualify, but it does give lenders the freedom to set scores as they see fit. But because these home loans are backed by the VA, their credit requirements are significantly more lenient. In fact, it’s not unusual to qualify for a VA loan even with a 580 score.
Once you’ve pre-qualified for any of these mortgage options, Blue Hen Buyers can help you find a newly-renovated property you can move into right away. We understand that many families can’t afford to move into a new home, making our renovated properties, which are more affordable, an attractive option. Call our offices today at 910-802-2222 to learn more about how our services can help you.