How To Get a Mortgage With Bad Credit: A Comprehensive Guide To Buy Your Dream Home

The Definitive Guide To Financing The Home You Deserve

Are you amongst the millions who have had wrong financial commitments in the past few years? Or are you one of the people who have lived their life on a single paycheck income? If that’s the case, you probably think buying a house is practically impossible, but that’s far from true.

Getting a mortgage is a challenge for self-employed people who do not get a regular income from their jobs. Surprisingly, even for those who get a steady paycheck, obtaining approval for a mortgage is not that easy either. But, as we mentioned before, it is not impossible. There are ways to get it.

A trusted Chandler mortgage company will share below a brief guide to successfully obtain a mortgage, even with bad credit.

Getting a mortgage to buy a home in Arizona

What Is a Bad Credit Score?

Mortgage lenders can set their credit score requirements when working with conventional home loans. Credit scores usually determine a financial risk, so they have to set the maximum risk according to what they are willing to take with loans.

Credit score requirements for conventional home loans are higher than other types of loans. However, government-backed loans require lower credit scores than traditional mortgages.

Generally speaking, a credit score indicates a preview of a person’s creditworthiness. That’s why potential lenders use credit scores to decide things like approving loans and extending credit.

Credit-scoring companies use different models to calculate a person’s credit score. Consequently, there are different credit scores and scoring models for numerous situations.

You can have more than one score, but keep in mind that a “good” credit score usually ranges from 300 to 850. Nevertheless, that range can vary depending on the financial situation or the credit-scoring company.

What Is The Minimum Score To Get a Mortgage?

No credit score will automatically disqualify you from a mortgage. Nonetheless, the lower you score, the harder it will be to find a Gilbert mortgage lender that approves the loan.

Conventional loans normally require a 620 credit score as a minimum, but as we previously said, government-backed loans are more flexible.

According to FICO, these are the usual indications for credit scores:

  • A range between 800–850 (Exceptional): 21 %
  • A range between 740–799 (Very Good): 25 %
  • A range between 670-739 (Good): 21 %
  • A range between 580-669 (Fair): 17 %
  • A range between  300-579 (Poor): 16 %

Your credit score can vary depending on the three credit reporting bureaus (Experian, TransUnion, and Equifax).

Can I Purchase a House If I Have a Bad Credit Score?

Experian indicates that a credit score below 670 FICO is low, but keep in mind that lenders can change what they consider low credit. Besides, a lender knows that not all buyers have the same credit situation. Outside credit scores, lenders also review things like:

  • The payment the borrower can afford
  • The amount of money the borrower earns
  • The total amount of debts the borrower has
  • If there are collectibles among the debts

Loan Options If You Have a Bad Credit Score

You can opt for any of the following loans if you have a low credit score. Do not forget to ask the Gold Canyon mortgage company about the requirements first.

FHA Loans

The Federal Housing Administration offers loans for low and moderate-income families. The FHA can be an excellent option if a buyer doesn’t qualify for conventional loans because of a bad credit score. The FHA can approve loans with low credit scores (as low as 500 if you can put down 10%).

You can increase the chances of approval if you prove two years of stable income. Plus, you should have a DTI ratio of 43% or lower.

VA Loans

Veterans can qualify for Veteran Affairs (VA) loans. People currently serving in the military can do the same too.

The Department of Veterans Affairs is in charge of this type of loan. This entity also provides a no-down payment.

Although the VA does not ask for specific credit score requirements, you must meet specific criteria to qualify.

Should I Trust a Mesa Mortgage Company?

Don’t let a bad credit score ruin your dream of buying the home of your dreams. You can still qualify for a mortgage with some research and the right financing program.

At KHoward Mortgage we understand how hard it can be to buy a house when having a low credit score. However, we can help you find the best financial solution thanks to our qualified team. Contact us today to learn more about the options and services we offer to help you get homeownership.

KHoward Mortgage Team Logo

2913 N Power Rd #108
Mesa, AZ 85215

Phone: 480-442-8834