How Can I Get A Mortgage With A Low Credit Score In The Age Of Covid-19?
When US interest rates were slashed to historic lows earlier this year in response to the unprecedented Covid-19 pandemic, a boom in mortgage lending was predicted. However, getting a mortgage with a low credit score is more challenging than ever.
With mortgage credit availability at its lowest level since February 2014, there is no guarantee that you’ll be able to secure a conventional home loan at the current fixed rate of 2.81%. Fortunately, you can still employ several strategies to finance or refinance a home during this difficult period.
What Can I Do To Mortgage My Home When I Have A Bad Credit Score?
With the economy struggling to recover from the impact of the coronavirus, many lenders have tightened their requirements. With FICO numbers of 620 and above now required to be considered for financing, bad credit customers are the first to feel the effects of this policy.
If you have a low rating, you can still do several things to increase your chances of qualifying for mortgage loans.
- Save up for a bigger down payment. Having 10% of your home’s value or more available in cash will increase your desirability as a borrower
- Explore your down payment assistance options. The FHA offers a variety of down payment grants to help property buyers secure government home loans for poor credit applicants
- Boost your savings. Being able to show surplus cash reserves will help you make a favorable impression with your bad credit score mortgage provider
- Submit supplementary data. On-time rent payments, utility bills, and phone bills can be used to boost your score through programs like Experian Boost, UltraFICO, or VantageScore
- Explain your financial situation. Telling your lender about special circumstances that caused your rating to drop could make the difference between a rejected and approved application
- Look for a co-signer. A trusted friend or relative who understands that they’ll be liable for your debt should you default could be the ideal choice. You’ll want to choose someone who has an excellent financial background to boost your chances of approval
- Do your research. While you may get a favorable APR from your existing mortgage provider, it’s always worth shopping around to find the best lending terms, especially on a large amount like the cost of a home
Poor Credit Mortgage Lenders
Knowing what bank or loan provider to approach for funding will save you both time and money when you shop around for the best APR and lowest fees in your credit rating category.
The low credit mortgage lenders listed below are worth considering if you’re planning to buy a new home or refinance your current property soon.
Vylla
With a FICO score of 620 and above being required for new applicants, this lender is an excellent choice for bad credit customers.
Vylla is known for its low down payment requirement of 3% and flexible home loan durations, ranging from 10 to 30 years.
If you’re interested in applying for government home loans for poor credit through this mortgage matching company, your FICO score requirements will be lower (starting from 500).
Homebridge
Finding a home mortgage for bad credit in these difficult times is easier when your lender offers flexible lending terms. Customers with scores as low as 550 can apply for financing with this company. Homebridge has grown impressively over the past few years and covers every state except Utah.
As a Homebridge customer, you’ll benefit from loan terms of between 15 and 30 years and down payment requirements between 3% and 5%. If your FICO numbers are on the lower side, you’ll want to find out more about this finance provider’s VA and USDA loans.
Mr. Cooper
With various loan types available and competitive interest rates, this loan provider is known for its variety and affordability. Customers in every US state except Hawaii can apply for home financing through this lender.
The selection of home lending products offered by Mr. Cooper includes FHA, VA, and IRRRL loans, ARMs, and jumbo loans in addition to conventional home loans. A FICO rating of 580-620 should be a sufficient minimum starting point for new applicants.
Conclusion
Despite the lower interest rates that are currently available, many bad credit customers are finding it challenging to qualify for mortgages due to stringent lending criteria.
To boost your chances of being approved for home financing, you’ll want to take steps like saving up for a down payment, improving your credit score, and shopping around for the best lender.
The lenders listed above provide a range of loan types and repayment periods with affordable down payment requirements, giving bad credit customers access to financing at this difficult time.
