In the past, only those with strong credit could purchase a home. These days, though, people with less than perfect credit, or even bad credit, can purchase a home.
However, people with poor credit shy away from purchasing a home in Albuquerque. Should a low credit score mean that you should throw out the idea of home ownership?
By learning about credit requirements and ways to improve your credit score, you can realize the dream of buying a home in Albuquerque.
How low can your score be to get a loan?
The rule of thumb is that lenders will not approve a loan with a credit score below 580. In some cases a credit score as low as 500 can be considered, though the down payment will be more.
How does your score affect your mortgage rate?
The rule is simple: the higher your score, the lower the rate.
If your credit score is not high enough, you will not be able to qualify for the more affordable rates. Another option is you may need a co-signer or the loan amount may be reduced.
How can you raise your credit?
You can get a free copy of your credit report every 12 months from each credit reporting company at AnnualCreditReport.com. When you check your credit report, scrutinize it for errors. Check for collections that were paid off already or debts you haven’t borrowed.
A new service called Experian Boost offers another way to boost your FICO score. This will raise your score if you make payments on time. Experian reports that the average user raised their score by 13 points, which would help you qualify for a lower mortgage rate.
Should you spend some time working on your credit before you buy a home?
If your credit score can be improved in a few months, then you should consider it. Your lender can help you find the most effective paths to improvement.
If your credit scores increases over time, you will save even more money. For example, the interest rate difference between a 3.5 percent and a 4 percent mortgage is $56 per month. That’s a savings of $20,427.
What is the best loan for low credit scores?
An FHA loan is designed to help people with low credit scores or who don’t have enough money for a large down-payment. But there’s a catch. Not all lenders will approve the loan, and you will have to pay extra for mortgage insurance.
The dream of buying a home in Albuquerque can be yours if you have a low credit score. In the end, you have to weigh the pros and cons, along with making choices that will improve your credit. If you want to learn more about your options for buying a home in Albuquerque with a lower credit score, contact us today.
Make sure to join us twice a week on our blog for more real estate advice and great reasons to buy a home in Albuquerque and the surrounding area. Follow us on Facebook for the latest Albuquerque real estate updates. Looking for the perfect home for sale in Albuquerque? Our easy-to-use home search tool can help you start the process. Contact us today to help you buy or sell your next home in Albuquerque.
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