We all know it takes a down payment a good credit to buy a house, but what number is “good enough” to purchase a house. Credit scores range between 300 and 850, which shows the customers willingness to pay back a loan. To get the best rates and terms a credit score of 740 or higher is needed. In today’s world that is a very difficult number to obtain, luckily there are many different loan options, even some for rally low scores. Your income and work history, plus your down payment and the economy will also factor in to help you get a better rate with a lower score. Here are 4 loan options explained:
- FHA loan (Federal Housing Administration loan) a government-backed loan, you will need a minimum credit score of 580 and 3.5% down, if your credit score is lower your not excluded you’ll just need to put 10% down.
- Non-Government backed loans, the problem that lies with FHA loans is the PMI insurance (private mortgage insurance) that the buyer must also get is they put down less than 20%, which can add hundreds of dollars to the monthly payment. This loan requires a 680 credit score with a minimum 5% down, but many lenders may require 10% down.
- Sub-prime Mortgage, even if you have bad credit 500 or below, you may still qualify for a loan, the minimum credit score and down payment depend on each individual lender, most sub-prime lenders use equity earned when considering a refinance, or a more significant down payment for purchasing.
- Private money lenders, these are people who have money to spend and are looking for an investment. Due to having a risky credit score, the loan will come with high interest around 10-15%.
If you are ready to purchase a home or have questions I am here to help you with the home buying process, I also have trusted lenders to help you find the most equity in your purchase and save you money monthly.