Newfi has helped many borrowers achieve homeownership by overcoming issues with their credit history, such as late payments, bankruptcy, or foreclosure.
What options are there for mortgages with low credit?
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 Products – Newfi has access to other affordable loan programs allowing credit scores as low as 600.
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 must 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 Mortgage Advisor today to see whether you can qualify for a mortgage with low credit. We’ll talk to you about why your credit isn’t where you want it to be, and what the right loan is for your situation.
How to improve your credit score for a mortgage application
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 – No more late payments! Set up alerts or autopay when upcoming payments are due to make sure you pay on time, every time.
- 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.
Why trust Newfi Lending with your home loan?
Newfi is a direct lender, not a broker, so we can make lending decisions fast and at low interest rates. We’ve earned a five-star customer satisfaction rating from LendingTree for our low rates, fast processing, and excellent customer service. Give us a call at (888) 316-3934 and see just how friendly we are!
How can I get more information?
Talk to us at Newfi Lending. We’ll get you a personalized home mortgage rate and review other mortgage options tailored to your situation.