Having a credit score of 300 can make it difficult to qualify for a mortgage loan, as most lenders require a minimum score of 500 for FHA-backed loans. However, other types of loans may be available to you. The best way to improve your chances is to make a refundable deposit on a secured credit card. Credit scores range from 300 to 850, and borrowers within a certain range may qualify for home loans.
Generally, you need a credit score of 740 or higher to get the best mortgage rates. However, you don't need an 850 rating to buy a home. Credit scores are determined by national credit agencies and include debts such as credit cards, car loans, or student loans. Mortgage lenders are protected by insurance that allows them to lend to borrowers with lower credit scores and smaller down payments.
Interest rates on these loans can be as low as 1%, and borrowers with credit scores below 640 may be eligible for USDA loans, but they will need to undergo manual overwriting. Conventional loans also tend to offer competitive interest rates and flexible repayment periods, from 8 to 30 years. A poor credit score would be 579 or less, while a very good to excellent credit would be 740 or more, and an excellent credit is 800 or more. To apply for a mortgage, you'll need a credit rating of at least 680.
Before you add a co-borrower who has bad credit, use a mortgage calculator to see if you can qualify for the loan on your own. There is no specific credit rating that will disqualify you from getting a mortgage, but the lower your rating, the harder it will be to find a lender who will approve you for a loan. To qualify for a VA loan, you must be an active duty service member, veteran, surviving spouse, or member of the Reserve or National Guard. FHA loans can benefit borrowers with lower credit ratings or those who spend a significant portion of their income on housing. If you don't make a down payment and it's your first VA loan, the VA loan financing fee will be 2.3% of your loan amount.
Neither Fannie Mae nor Freddie Mac underwriting guidelines specifically mention credit counseling or DMPs for compliant loans that are processed through their automated underwriting systems. VA loans do not have a government-set minimum credit score for buying a home. Experian and Discover offer free FICO scores to everyone, and many banks and credit card issuers offer free access to their own customers. It is still possible to get a loan with a lower credit score, including one in the 500s.
