Credit rating is one important factor in qualifying for a mortgage. In most cases, lenders require borrowers to have a minimum score of 680 to obtain a loan. It is, however, possible to qualify for a mortgage with bad or low credit rating. A low credit score falls in fair (601 to 660) and poor (501 to 600) ranges.
Available Loan Programs
The Federal Housing Authority (FHA) mortgage programs can be ideal if you have lenient qualifications. Primary Residential Mortgage, Inc. and other mortgage companies in Lake Oswego note that this allows borrowers to get a mortgage even with a score as low as 580, but shouldn’t have unsettled outstanding bills or late payments in the last year. There is also the Veterans Affairs (VA) loan program, which requires a score of at least 620.
The Waiting Period
In some cases, there are major credit issues that will require you to wait a period of time before applying for the loan. This depends on the type of mortgage. With a foreclosure, for instance, you need to wait two years for both VA and FHA loans, and seven years for conventional mortgages. This can be shorter if you have suffered from extenuating circumstances. The waiting period will then be one year for FHA and, and three years for conventional.
Explaining the Low Score
You may need to written summary or explanation before submitting a loan application. Be sure to write an honest explanation of the credit issue or any hardship you have suffered. Don’t try to make excuses or be defensive. You should also take note of the steps you have taken to increase your score. A clear and a helpful explanation can improve your chances of getting a mortgage approval.
Whether you’ll be qualified or not will depend on the mortgage lender. In most cases, if the lender sees potential problems with your situation, they will not offer you the loan. If you can get a mortgage, it is important to understand different loan options, as well as their terms, payment, and interests.