Traditionally, it’s been recommended that prospective homebuyers try to ensure that their credit score is as high as possible before shopping for a mortgage loan. Many large banks won’t even consider lending to people with a credit score lower than 620, which knocks a lot of people out of the running for homeownership.
The unique thing about EPM is that we are NOT like those big banks and have many mortgage options for borrowers with credit scores as low as 500. But there are some things you should know and be prepared for if you fall into this category and are looking to get a home loan.
Have an Emergency Expense Fund.
When you buy a house, you’re buying all the things that could potentially go wrong with it. And all the financial responsibility will fall on you. From busted appliances, to storm damage, to dry rot and bursting pipes- you’re going to have to expect the unexpected and have an emergency fund in place to handle expenses when things go wrong.
Pay off Other Large Debt.
Not only will this help start to build your credit score up, but it will make it easier to afford those unexpected expenses we just talked about. You may also be able to afford some upgrades if you play your cards right and go into homeownership with a plan. We have home loan options that make it easier to buy a fixer-upper and build yourself into the home of your dreams, but you are going to want to make sure you have paid off other big expenses you have hanging over you first. You can contact a financial planner to get some ideas about where to start.
Be Honest with Yourself About What You Can Afford.
This is another time a financial planner may come in handy. It’s common to have googly eyes over real estate when looking for a home, but get real about what your other expenses are your money coming in vs what’s going out. You don’t want to stretch yourself too thin or you’ll end up with a bankruptcy or foreclosure on your record. EPM has options for these borrowers too, but it will potentially cost you more in the long run.
Carefully Research Creative Ways to Fund your Loan.
Take extra care to make sure you have done your homework on this one because there are lots of scams out there waiting to prey on eager homeowners. However, there are unique ways you may find to qualify for a loan with a low credit score. Rent to Own is a popular avenue that many homeowners go down, as is seller financing- especially if your seller is extremely motivated. Government funded loans are the most popular among many different ways you can get funding even with a low credit score. Make sure you do your homework and work with trusted pros to make sure you are making financial decisions that will help build your credit and wealth instead of break it down.
There are Lots of Different Options Out There.
Educate Yourself: EPM offers Conventional,FHA, VA, USDA loan options and more. Learn what kinds of loans you might qualify for, and which would be the best fit for your unique needs and budget. You should do some of your own research, and can start off by checking out information right here in the EPM Blog. From there, a trusted lender at EPM can help you understand your options and find a good fit.