Is a low credit score preventing you from buying a house?

Written by Posted On Monday, 28 October 2019 01:35
Buying a house Buying a house

It’s a universal dream to everybody out there to own a house. Though, to some people especially the newly employed, owning a house is a very difficult task. First there’s no enough money and secondly there’s no reliable financing because their credit score doesn’t allow. A credit score is a 3 digit number that can make a lot of differences when you are searching for mortgage. This number is very influential when you are approaching lenders because its the number they use to decide how likely you are to repay the money on time.

One thing that most people don’t know is that a credit score is a very influential number that affects your financial life. This means that lenders usually check whether your credit is excellent or bad before they choose to give you a credit card or a loan. If your credit score is very high, then the more you are likely to qualify for a loan.

If your credit score is not where you want it to be or if a low credit score is prevent you from owning a house, then you are not alone. Many people have the same issue but today I have some good news. We all understand that improving your credit score can take years but you cannot wait for years without a house. This means that the earlier you start on solving this issue the better. Besides many other solutions, getting in touch with credit repair law firm can be your shortest route to your new home.

How credit score is calculated?

Credit score is calculated by use of a certain mathematical algorithm to the information in your three credit reports. This shows that almost every lender has a specific algorithm that they use. Some financial companies and the lenders use some credit scoring models such as FICO score which is the most common. The FICO score ranges from 300-850. With that in mind, you don’t have to worry so much about the model they will use because factors that affects the scores are closely similar.

What credit score is needed to buy a house?

As I had already stated, the lifestyle of a small home is not for everyone. That is the reason why you are worried about your credit score. If you have ever tried to think of the credit score that is needed to own a house, then the answer is here today. Never assume your credit score will automatically disqualify you from getting that dream house because there is always a solution.

Regardless of the fact that you expect an exact number, this is not the case. The fact is that the minimum score needed will greatly depend on the type of loan. The reason why it’s like this is the fact that the credit score is not the only thing that will determine your eligibility for the home loan. Though, it’s still an important factor in determining your eligibility for a mortgage. Here are some examples.

Conventional Bank Mortgages: 620+

Many sources show that the minimum score for conventional bank mortgage is anything above 620. The reason behind is because Fannie Mae and Freddie Mac which are all government-sponsored programs require borrowers scores of at least 620.

So can you buy a house with bad credit score?

Yes this is possible but it’s going to take some time. Additionally, this process is going to cost you additional money. The fact is that the loans that are available for those with low credit scores usually attract higher mortgage interests. Though, if you really want to own a house, there’s something you can do to fulfill your dreams.

Utilize programs that help you qualify for a loan

If you are a first time home buyer, the government and several other organizations have done something to make sure you qualify for a loan. Additionally, you can do something else to qualify for a loan to buy your house.

Understand your credit history

To make an informed decision, you should start by getting your copies of credit reports. These copies will come with personal details such as payment history, bankruptcy reports and other personalized information. Getting such copies ensures that you have all the information to figure out your inconsistencies. This puts you at a better position to be able to report for errors, boost your score and at the same time pay your debts.

Get in touch with a housing counselor

Speaking to a house counselor is very crucial because they will help you understand the different stages of house buying process. They can as well give you some insights on the available lending options, how your credit score will factor in and also how to close the house.

Fixing your low credit score

There are several things you can do to fix your credit score. Here are some of the tips that can greatly help you fix your credit score.

Pay your bills on time

The reality is that your bill payment history is the largest contributor on your credit score. What this means is that if you can really sit down and try to fix all your debts on time, you will soon attract a higher credit score. The best thing in this case is to make sure you have enough money on your portal to cover your payments.

Pay down debts

The other thing that is likely to affect your credit score is the amount owed. As a matter of fact, this is likely to make up 30% of your credit score. The lender expects that you pay your full dues by the end of the year. Failure to do that, you will have a low credit score which will eventually affect your mortgages and loans.

I bet you have already realized that buying a house can be easy even when you have low credit. Though, buying a house with a low credit is going to cost you a lot of money.

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