Becoming Eligible for a Loan with a Credit Score of 580: How is This Possible?
Are you aware that the mortgage sector is continuing to raise its credit in regards of loans to credit? If yes, then you need to know that mortgage lenders do this in order to stop foreclosure and make their business run successfully.
You may take the help of credit consolidation to improve your credit score so that you can qualify for a mortgage loan. Even though the credit guidelines have been constricted and high credit score is becoming the requirement to take out a loan, there are suitable ways that can help you get financed with low credit score.
Speak to a Mortgage Broker About Buying a Home
In order to qualify for a loan with a credit score of 580, you need to speak to a mortgage broker about buying a home. When he knows that your credit score is below 580, he will provide you details about the Federal Housing Authority (FHA) loans that encourage affordable housing and lesser down payment.
You need to know that FHA loans have easy guidelines in comparison to the other types of loans and some FHA lenders will fund a purchase loan with a low credit score. There are few lenders who will provide money to the buyers even with low credit score. A credit card consolidation can help you raise your credit score.
If the broker cannot give the necessary details, you should get in touch with a different broker.
Fill out the Application Form of the Loan
You need to fill out the loan application form and provide evidence that you have sufficient money to make the down payment. Make sure you are aware that the Federal Housing Authority (FHA) loan needs 3.5 percent of the purchase price of the house for the down payment. In order to do proper calculation for the down payment amount, you will have to multiple the sales price by the percent needed. For example, if the cost of the house is $300,000, then you need to multiply $300,000 X 3.5% which is equal to $10,500.
Provide the Income Proof of a Minimum of Two Years
If you are married, then both you and your partner need to be eligible for the loan without a co-borrower. Though the FHA loans permit non-occupying co-borrowers on loans to enable the buyers qualify for the home loans, the lender will not agree to this practice if the credit scores on the credit report are very low.
Limitations of the Mortgage Lender Regarding Low Credit Score
The mortgage lender may have certain limitations regarding loan approval when you have low credit score. An example of this may be that the mortgage lender may restrict how much a seller can make a payment to the closing costs.
They may require that the buyer have kept some money aside as savings after closing the loan. This may be an amount of two to three months of monthly payments. Your mortgage broker will provide you the exact details on what is needed. However, you need to know that the limitation may differ from one lender to the other.
You should follow the above steps if you want to qualify for a loan with a 580 credit score. It may seem impossible to get a favorable loan based on your credit score, but there are always steps you can take to improve your chances and slowly rebuild your score. Since mortgage lenders are raising their standards, it is more important than ever to build your credit score.