Looking for a home loan is itself an overwhelming task. Over the top, if you have a bad credit score, this task becomes relatively tricky. However, fortunately, people with bad credit also have open home loan options. At first, you should get a pre-approved home loan option available to help lenders open up mortgage options for borrowers with bad credit.
Types Of Home Loans Available For Borrowers With Bad Credit
Following are some options in which you can get a pre-approved home loan option available even if you have a bad credit score:
FHA Home Loans
The Federal Housing Administration is highly flexible with low credit scores for borrowers. Most FHA lenders provide home loans with low credit scores, such as 580 with a 3.5 % down payment. They also offer home loans for borrowers with credit scores of 500 to 579, but with 10% down payments.
USDA loans are the first choice of home loan applicants due to their zero down payment and low-interest rate. A FICO score of 640 is required, but lenders also go for less than 640. It's perfect for buyers with low incomes and finances.
The Department of Veteran Affairs provides these loans. VA home loans are applicable only for veterans, service members, and spouses of veterans. Lenders providing VA loans require a minimum credit score of 580 to 620. They have the lowest rates and no down payment services also.
At last, you can also go for traditional loans. However, research is required to find lenders who can provide conventional loans with low credit scores. A minimum score of 620 to 640 is feasible enough to sanction home loans.
It's always beneficial to improve your credit score as it not only makes the home loan approval easier but also reduces the interest rates. This will save you money as well as build your financial strength. Also, if you get a pre-approved home loan option available, it will help you get a better view of your finances and budget.