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Low Credit Score Mortgage Options

Don’t let low credit scores stop your home buying journey, get informed about your mortgage options!

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Your Low Credit Score Mortgage Options

For many borrowers, credit issues can feel like a massive roadblock in the home buying process. Having low or bad credit due to things like late payments, bankruptcy, or foreclosures shouldn’t be the thing stopping you from finding a mortgage option! Newfi offers a variety of mortgages available to borrowers facing credit issues.

Get In Touch with a Newfi Senior Loan Advisor Today!

Our team of dedicated Senior Loan Advisors are here to help you through the mortgage process and answer any questions you may have!

What is a

Credit Score?

A credit score is a three digit number (between 300 and 850) that helps lenders and creditors assess your ability to pay back a loan. The higher your credit score, the easier it is to get approval for things like credit cards, home loans, car loans, and mortgages.

What is Considered a Low or Bad Credit Score?

Defining bad credit can be difficult in the mortgage industry, because mortgage lenders tend to have varying credit requirements across different home loans. In general, credit scores below 580 are often considered “poor” while credit scores in the high 500’s to mid-600’s are “fair”, and high-600’s and mid-700’s are considered “good”. Anyone with a credit score above 760 is typically considered to be in excellent standing.

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What are My Low Credit Score

Mortgage Options?

There are a variety of home loan options for borrowers with poor credit:

FHA Loans

FHA Loans are government-backed mortgages that can be accessed with a credit score as low as 580. FHA loans require mortgage insurance for some or all of the term of the loan.

Conventional Loans

Even if you have low credit or have experienced credit events like bankruptcy, foreclosure, or short sale, there may be a standard conventional loan available to you. Depending on the size of your down payment, you may be able to avoid mortgage insurance.

Other Mortgage Options

Newfi has access to other affordable loan programs allowing credit scores as low as 600.

Frequently Asked Questions

What Factors Negatively Affect Your Credit Score?

A number of credit factors can impact your chances of getting a mortgage:

  • Bankruptcy 
      • Getting a mortgage after bankruptcy is possible, but there are waiting periods. If you declared Chapter 7 bankruptcy within the last 24 months or Chapter 13 within the last 12 months, you may need to wait before qualifying for a mortgage.
  • Foreclosure
      • Foreclosures do not automatically disqualify you from getting a mortgage, but as with bankruptcy, there is a waiting period. You may need to wait at least 24 months to qualify for a mortgage after foreclosure.
  • Collections
      • Collections or disputed accounts can make it hard to qualify for a mortgage because of the impact they have on your credit score. They can also stay on your credit report for up to 7 years. The best way to deal with a collection account is to remove it from dispute and pay it off as soon as possible. It can take up to 60 days for collections fixes to be reflected in your credit report, so it’s best to do this as soon as you can.
  • Late Payments
    • Missing a payment on any type of debt (car, mortgage, credit cards, etc.) stays on your credit report for six years regardless of how quick you settle your account. This doesn’t mean that you won’t qualify for a mortgage, but you may face higher interest rates, and it’s best to have a solid recent history of making on-time payments.

That said, every situation is different! To know where you stand, contact a Newfi Senior Loan Advisor today to see if you can qualify for a mortgage with your current credit score.

How Do You Improve Your Credit?

If you’re working to increase your credit score to get a mortgage in the future, consider these tips:

  • Check your credit report
      • The credit bureaus don’t have perfect data, and errors can creep in. You can obtain a free copy of your credit report from all three major credit bureaus here. Look over each of the reports and call the bureaus if you see an error.
  • Pay your bills on time
      • Missing payments is a very common reason people have credit issues. Make sure that you’re not missing payments! Set up reminders and alerts or choose to use the autopay option so that you are always ready when upcoming payments are due,
  • Limit credit inquiries
      • Keep the number of credit card, auto loan, and mortgage applications to a minimum to avoid unwanted changes to your credit score.
  • Don’t overuse your credit cards
    • Using a large percentage of your available balance raises red flags for your credit score. Be sure to make your payments on time, and ideally, pay more than your minimum balance due.

What are the Disadvantages of a Low Credit Score Mortgage Option?

  • High Interest Rates
    • Lower credit scores often translate into higher interest rates comparatively. This is because lenders use your credit score to determine your ability to pay back a loan.
  • High Down Payments
    • Down payments help borrowers secure their mortgage loan. You may be required to put a higher down payment on your mortgage to secure your home loan. This is because mortgage loans with low credit scores can be considered risky for mortgage lenders, so ask that borrowers to put more down on their mortgage up front.
  • Mortgage Insurance 
    • You may be required to have mortgage insurance on your home loan, depending on the mortgage option you qualify for. Mortgage insurance is an additional fee, tacked onto your monthly payments, that lenders charge borrowers for a variety of reasons. Like, low credit scores and down payments under 20%.

What are Current Mortgage Rates?

  • Your exact rates depend on the interest rate you qualify for and the term you select. Contact us to review your options and calculate your payment.

What is the First Step in Getting a Mortgage?

Because everyone has their own unique situation, we recommend speaking to a loan advisor about your options as your first step. Go to newfi.com/get-started or fill out the form on this page for a free consultation with one of our licensed loan advisors to learn about what documentation and qualifications you may need!