American Dream Home Mortgage has decades of experience helping all people of all walks of life from bad credit all the way to superb credit history to find the ideal loan option for them.
There are numerous benefits for individuals with above average credit scores, ranging from lower interest rates, large loan limits and more loan options. However, that doesn’t mean that those with below-average credit, or even limited credit history cannot take part in the home buying experience. There are several loan programs designed specifically for individuals whose credit is in recovery.
Credit Score Requirements
FICO credit scores range from 300-850. Although, FICO no longer releases the median nationwide score, as of April 2016, it was 699. A 620 minimum FICO score is fairly common among lenders who considered it to be a borrower-friendly rate; however, some lenders or specific loan programs are willing to accept FICO credit scores well below 620.
FHA Loan: The FHA, technically, does not have a credit score minimum to qualify for the loan; however your score can affect the down payment you are required to pay upfront. A minimum 580 credit score will qualify a borrower for the 3.5% down rate; however, credit scores lower than a 580 will need a larger down payment of 10%.
VA Loan: Like the FHA loan, the VA does not restrict qualification on credit scores. VA-approved lenders on the other hand may set a credit score requirement to mitigate their risk for defaults. For many VA-approved lenders, the average minimum score prefered is 620.
Conventional Loan: These loans are not backed by the government so lenders typically desire higher credit scores to help mitigate their risk in the loan. It is not uncommon to see a lender require 740 or higher to qualify for a conventional loan.
USDA Loan: Another loan program that is backed by the government and does not set restrictions on FICO scores. Instead, the location of the home is restricted to rural areas. The average lender required score is typically around 660. Lower scores are accepted but may come with additional requirements.
HomeReady™ Loan: Sponsored by Fannie Mae, or low to moderate income borrowers, this loan program requires a minimum FICO score of 620 is needed, but the higher your score, the better rates you may be offered.
Home Possible® Loan: Similar to the HomeReady™ loan program, the Home Possible® is sponsored by Freddie Mac. The preferred score by most lenders is 620, but lower scores may qualify if they pay a higher down payment. Even borrowers without any credit can qualify with around 5% down.