Lenders don’t necessarily have a credit score that will disqualify someone for a home loan. They are all entitled to set the limit for a minimum credit score to whatever they like. Because of this, it isn’t unusual to find that a borrower cannot obtain a mortgage loan with a credit score below 500. If these borrowers take some time to increase their scores, they may be able to qualify for one of the following loans below:
FHA loans are backed by the Federal Housing Administration, so when people take out these loans to purchase their homes, lenders see them as very good risks. These loans are also excellent for borrowers because it is easier to qualify for them even if they have lower credit scores. The following qualifications are required for FHA loans:
- A credit score of around 580. People can be approved with a lower score if they can offer a down payment of at least 10%.
- The borrowers must purchase the property as their primary residence.
VA loans are designated for former and current members of the military, and they are backed by the Department of Veterans Affairs. Qualifying members of the military and their spouses may be able to purchase a home without having to offer a down payment. If the future homeowner is going to apply for a loan with Rocket Mortgage, he or she will need to have at least a 620 credit score.
The United States Department of Agriculture backs USDA loans. These loans are specifically for the purchase of homes in rural areas within the United States, and they don’t require that future homeowners offer a down payment. In most cases, borrowers need to have at least a 640 credit score, and they must also meet the income requirements to qualify.
The necessary credit score, income and down payment will all vary for conventional loans. In most cases, people can expect to be asked to provide a 620 credit score before they will be approved for a home loan. They can also qualify for a home loan with a score that is a little lower than 620 if they are also earning a high income and will be able to offer a higher down payment.