Buying a home is a huge financial decision, and the better your credit score, the easier it will be for you to get approved for a home loan. But what if your credit score is stuck at that dreadful 580, is it possible to get approved? The answer is yes! Although it is not ideal, it is possible to buy a home with a credit score of 580. Listed below are a few tips and tricks for getting approval for 580 credit score home loans and different ways to help get your credit score up in the meantime.
FHA Loan may your Best Bet for 580 Credit Score Home Loans
When using an FHA loan with a 580 credit score, you are required to put down a 3.5% down payment, which is still considered a low payment advantage. FHA is not a non-prime loan program. Non-prime loan programs are meant for borrowers who have a negative credit history due to a large delinquency such as a foreclosure, bankruptcy, or continuous late payments. Non-prime loan programs have increased interest rates and should only be used as a temporary fix for an immediate need to buy a home. If you have a 580 credit score, the FHA loan is going to be the easiest for you to get because they are geared towards lower to moderate income families, first home buyers, and people with lower credit scores while still offering low down payments and more likely to compromise than traditional loans.
Stipulations with 580 Credit Score Home Loans
There is no guarantee that you will be approved with a credit score of 580, but there are stipulations. If your credit score is low because of the lack of built up credit history, you are more likely to get approved. If your credit score is 580 or lower because of delinquencies, slow payments, or judgements, you are less likely to get approved for a home loan. Although more lenient, FHA loans are still going to require that you have a low debt-to-income ratio, which promises you can afford to not only make your mortgage payment each month, but other debt minimum payments as well. Not all lenders and brokers offer an FHA loan, and if you are searching for 580 credit score home loans, you need to find banks and brokers who offer FHA loans and price them out. Looking at multiple offers may be time consuming but it can save you a lot of money in the end. Start your first consultation today with our amazing staff who promise to answer all of your home-buying questions.
Ways To Increase Credit Score in a Short Period of Time
Sometimes the home buying process can take quite a bit of time, so in the meantime, work on raising your credit score. In just a matter of a few months you can raise your credit score, so getting approved for 580 credit score home loans will be much easier. Listed below are a few tricks to raising your credit score in a shorter amount of time:
- Don’t open more credit cards just to increase your credit limit
- Make larger payments on each of your credit cards to get the payment lower and interest rate decreased
- Correct errors on your credit report
- Reduce your debt-to-income ratio (15% is the highest suggested amount)
- Have a good mix of debt — a car loan, credit card
- Become an authorized user on a family member’s account who has good credit
- Request to increase the limit on an already established credit card — this could help to raise your credit score
- Negotiate a deal if you have defaulted on a card or loan from the past — oftentimes companies will take a partial payment as rectification and this will undoubtedly raise your credit score.
- Put all of your payments on automatic withdrawals from your account as to ensure NO late payments
Compensating factors to help with 580 Credit Score Home Loans
580 credit score home loans are possible if you work with the right lender. If you want to get approved for a home loan with a 580 credit score you should know the following:
- You should be able to put 10% down on your home, even if you plan to put less down
- You must prove that you can afford the monthly mortgage
- You should have minimal other debts that you make monthly payments on
- Show proof of potential salary increase in the future
- If you work part-time, you need a 12 month history with the same company
Each of the above factors will help you get approved for a home loan if your credit score is suffering. Lenders wants to know that you are responsible and able to pay for your upcoming mortgage, anything that will strengthen your case is crucial for your loan approval. For more questions please feel free to contact us.