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Qualifying for a mortgage with a low credit score can be a difficult process. Most lenders are interested in your credit score, since it indicates your level of responsibility as a borrower. Your credit worthiness is judged by your credit score, and mortgage lenders assess your credit history in order to understand what level of risk you are likely to present as a borrower for them. Your question about a mortgage is likely to be answered by your credit score.
However, each lender may not have the same requirements with regard to loaning you money. There are some mortgage lenders who specialize in offering mortgage loans to specific consumers with bad credit scores. When you make the effort to get approved through such lenders, you can increase the chances that your home loan application will be approved. If your score is poor, will likely be rejected by so-called "prime" lenders.
So, What is a Poor Credit Score?
There are three major credit bureaus-TransUnion, Equifax and Experion. TransUnion and Equifax use FICO scoring model while Experion simulates by its own formula. FICO based credit scores range from 300 to 850 points. A score below 620 is considered bad credit, but you might have difficulties being approved for a loan if your score is below 680 -- and you won't qualify for the best rates with many lenders unless your credit score is at least a 720. Special lenders, though, will agree to loan you at a credit score of 560.
Each bureau gives score as per the calculation done on the basis of information obtained from different sources, so you will likely have multiple scores. Some lenders even have their own scoring models. Try to find out what scoring model will be used beforehand, and do your best to clean up your credit ahead of time.
Checking Your Credit History
It is important for you to get a copy of your credit report and examine each and every item in detail. Cross check the information of your debt payment history with what's on your credit report. If you come across any disputed area or figure, send a letter to each bureau to rectify it. Remember that erroneous information can downgrade your score.
In some cases, it might be wise to work on fixing your credit score, and then applying for a mortgage when you are better able to qualify, or to get a better deal. If you find difficult to get a mortgage with your score, contacting a mortgage broker can help. A mortgage broker has access to different lenders, and can help you shop around for a mortgage that fits you.
Sophie writes about mortgage and finance topics on behalf of MortgageFit.
