Mortgage
October 27, 2020

What to Do When You Want to Buy a Home but Have a Low Credit Score

When your sights are set on buying your dream house, you don’t want a low credit score to get in the way. Building credit is important when it comes to preparing yourself financially to get a mortgage. Having a higher credit score not only helps you qualify for a mortgage, but it may also help you get a lower rate. Homestead Funding is not a credit repair specialist, but we can discuss some general tips to assist you in your home buying journey. So, what can you do when you’re ready to buy a house, but you have a low credit score?

Make a Bigger Down Payment

If you have a low credit score, you may only qualify for a certain amount in a mortgage. If you can cover the difference between that amount and the price of the house in a down payment, you may be able to purchase a house that way.

Pay Down Balances

One way to improve your credit score is by paying down some of your credit balances. This increases your available credit which is an essential piece of your credit score. And a higher credit score means a better chance of qualifying for a larger mortgage and potentially better rates.

Consider a Government-Backed Loan

Loans that are insured by the government typically have lower credit score requirements when it comes to being approved. Unlike conventional loans which are not insured by the government and typically have higher credit score requirements. Options like FHA, VA, or USDA loans are examples of government-backed loans that may have more flexible standards to qualify. Applying for a loan insured by the government may help you get approved for a mortgage despite a lower credit score – especially if you can also afford a decent down payment.

Improve Your Credit with Help from a Credit Coach

Improving your credit score is the best way to ensure you qualify and help you get the best rate possible. Your credit score is made up of many factors, including payment history, credit utilization, credit history age, credit mix, and amount of new credit. To guide you through the process of building your credit, a credit coach can be a big help.

Homestead Funding offers access to personalized credit coaching from Get Credit Healthy. One-on-one credit coaching can help you build your credit to where it needs to be to get you into your dream home. Your dedicated FICO and FCRA certified credit coach will customize a strategic plan, made just for you, to improve your credit. You’ll get critical information, tips, and education – plus real FICO scores each month to watch your progress.

Contact us today and one of our knowledgeable Loan Originators will help walk you through what you need to do to start on the path to your dream home and begin building credit. Plus, we can answer any questions you may have on the home buying process and how you can reach your goals.