What’s the lowest credit score to get a home loan?

There is a significant amount of inaccurate information online and in the real estate community about the credit score needed to get a home loan to purchase or refinance a home. Talk to one company they’ll tell you XYZ, talk to another company they’ll tell you something else entirely, talk to another company, and you guessed it, the story will change again. If your credit score needs some work, the following information is for you…


The minimum credit score to get a residential mortgage loan via a traditional mortgage source, not private money, not hard and not excessively expensive is an FHA 30-year fixed rate mortgage, which plays host to a middle credit score of 500 or more.

Not all mortgage companies have the desire and the motivation or the energy or the willingness to put together a loan for a family who has a credit score in this range. You have to remember as a consumer mortgage companies have to take a business perspective when originating loans. They will work on loans that have a higher probability of closing, which generally points to a higher credit score. Despite what you might hear, see or read, this is the absolute truth with mortgage companies in America today. However, that being said. There are companies that will do loans for families who do have a lower credit score.

You must know and understand it will not be an easy process embrace it and accept it. There are going to be more asks for paperwork in the process, and it’s going to feel like you’re jumping through a lot of hoops and you are because your credit score needs love. It is worth the effort because your other alternative is private money which is radically more expensive think 10 to 12% interest rates versus interest rates around 6.5 to 7% on an FHA 30-year fixed rate mortgage assuming a 500 credit score.

It is true the FHA only requires 3.5% down however you’ll be hard-pressed to find a lender that will do a 3.5% down FHA loan with a 500 credit score most generally want 10% down some even 15% down to offset the risk due to the credit score. The reason why the credit score is so important is that a credit score is the only indicator in the world of mortgage lending that gives a lender, a probability of whether or not, you will default on a payment obligation in the next 90 days. It is critical that you work with a lender who specifically lends flexibility. There will be extra costs in the form of discount points associated with FHA financing with this type of credit score that you’ll have to either absorb and cover with your cash or have the seller cover.

Patience, understanding, and making sure the lender you’re applying with can actually close a loan with this type of credit score. Beyond this, it’s also good to work with a lender who can do a rapid rescore to help get your credit score up. Maybe your credit score is under 500 and you need to pay off a couple of credit cards for example with certain specific percentages and your credit score could climb over 500 and you could be in an eligible category. Don’t be discouraged. The goal is to work with a lender who not only understands the intricacies of credit and has the experience to actually help you, but also has the follow-through and the willingness to help you and your family be successful as it relates to getting a mortgage loan with less than perfect credit.

Looking to buy a home with less-than-perfect credit? Get a no-cost quote today!


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