02/11/2023
Happy Saturday!!!
Buying a home with a 580 credit score is VERY possible, please do not let anyone tell you otherwise.
👉FHA allows you to put as little as 3.5% down and purchase a home with a 580 credit score.
👉Both VA and USDA allow you to put no money down AND technically don’t have a score minimum but most lenders allow you to go as low as 580 with both.
🛑Some banks require a 640 or higher but that is THEIR requirement (called an overlay) NOT USDA OR VA’s requirements! Make sure you are applying with lenders who don’t have OVERLAYS‼️(me)
🔑The key to purchasing a home with a score that is 580 is having other positive factors to offset the lower score.
If you have a 580 score, are currently late on accounts, have changed jobs 6 times within the past 2 years, have been late on your rent multiple times, AND have no money saved, let’s keep it real, you’re probably NOT going to be able to purchase a home if your score is 580 ( and even with a higher score you may still have issues because the investors need to be able to see stability and the ability to repay.)
✅ however- there are people purchasing homes every day with a lower credit score. People make mistakes and run into unexpected situations all the time which may cause them to miss a payment or two but that doesn’t mean they don’t deserve the chance to buy a home especially if they have gotten themselves back on track.
Here are a few things that can help approval odds with a lower credit score:
⭐️Have no late payments on your credit report for the past 12 months. (24 months is even better).
⭐️If you are paying rent, don’t have any payments that were late more than 30 days.
Oftentimes with a lower score, a rental verification is required and you can not have any 30-day or more late payments in the last 12 months.
⭐️If you are paying rent, try to find a home where the mortgage is not much more than your current rent. This is considered payment shock if you currently pay $700, but your mortgage will be $1,900, but if you currently pay $700 and your mortgage will be $800 that is a low payment shock and considered a positive factor.
⭐️If you have money saved, that is always a plus. Reserves are used to help increase approval odds.
Reserves are the amount of money you have left after you purchase your home.
☄️For example, if you need $10,000 to close on your home and the mortgage payments will be $1,000 per month and you have $13,000 in the bank, then you have $3,000 left after you close and pay $10,000 which means you have 3 months of reserves. A reserve is equal to 1 month mortgage payment. Having 2-3 months of reserves or more could help you get approved with a lower score.
🏦You may also use a 401K account to count as reserves and assets. So if all you have is $10,000 in the bank, but your 401K has money in it, 60% of the 401K account can be used as an asset and can be considered as reserves even if you don’t take the money out. So if you have $5,000 in a 401K, 60% would be counted as assets for you so that is $3,000 (5000 x 60%) which would give 3 months of reserves. Always make sure you supply your 401K statement to your loan officer even if you don’t plan to use the funds because they help approval odds.
💲Having a low debt to income ratio can also help your approval odds.
🗣️🗣️🗣️For those. “Yeah, but with a 580, your interest rate will be so high” people….Here’s some TEA 🍵….Your rate COST may be higher, not necessarily the rate itself, BUT if you find a home and get a seller credit, the seller could pay to lower your rate and you could have the same rate as someone with an 800 credit score for no money from you as the buyer
⚠️⚠️⚠️PLEASE NOTE I NEVER SAID YOU WILL 100% BE ABLE TO BUY A HOME WITH A 580 SCORE, I AM SAYING IT IS POSSIBLE‼️‼️‼️
