Ten years after the Great Recession, many people are still rebuilding their credit and improving their financial stability. At the same time, mortgage rates are at historic lows and there are a lot of people out there who don’t want to pay rent anymore, but don’t have good credit, and are wondering if they can still qualify for a mortgage loan and buy a house. Finding a bad credit home loan with an interest rate and loan terms that work for you will take some serious homework on your part, but it can be done. Just because you have bad credit doesn’t mean you should be barred from becoming a homeowner. Learn how your credit score can determine whether you qualify for a loan and how you can go about buying a house with bad credit in Lancaster, PA.
What Your Credit Score Means
If you are considering buying a house, it is important to understand what your credit score stands for and what it says about your credit history and, more importantly, your creditworthiness. A credit score is a three-digit number that is calculated based on your payment history, the amount you owe, the types of credit your carry, the length of your credit history and any new credit, among other factors. The credit score most commonly used by mortgage lenders is called a FICO score and this score ranges from a low of 300 to a high of 850. Generally speaking, the higher your credit score, the better your financial situation, and the more likely you are to qualify for a mortgage.
What’s So Bad About Bad Credit?
When it comes to buying a house, having a good credit score generally means you will get a good mortgage with a low interest rate. With a bad credit score, you could end up with a much higher interest rate and less attractive loan terms, or you risk not qualifying for a mortgage at all. Keep in mind that qualifying for a mortgage loan involves a great deal more than just your credit score, but as a general rule, a FICO score below 620 can make it very difficult to buy a home with a conventional mortgage. Still, from low credit score home loans to cash options, there are plenty of other options out there for individuals with bad credit who want to own a home.
Bad Credit Home Loans
In the past, you needed good income and credit in order to be approved for a mortgage loan, which made it nearly impossible for first-time homebuyers with bad credit to buy a house. Today, there are bad credit home loans that offer more flexible credit requirements for prospective borrowers with lower credit scores. One common example is a Federal Housing Administration (FHA) loan, which requires a credit score as low as 500 with 10% down, or as low as 580 with 3.5% down. There are other home loan options out there for borrowers with bad credit, including VA home loans, home improvement loans, and USDA rural development loans, which were created to encourage home ownership in rural areas of the country.
Cheap Houses for Sale in Lancaster PA
In order to make homeownership more affordable and attainable for prospective homebuyers with less than stellar credit, there are many states and regions that offer housing assistance programs. For example, there are cheap houses for sale in Lancaster, PA that may be an option for you thanks to a number of state and county programs that provide down payment and closing cost assistance or home loans with low interest rates and favorable terms. If you are considering buying a home and you are looking for houses for sale in Lancaster County, but your credit isn’t where you would like it to be, don’t give up. Do your research and find a bad credit home loan that works for you.