How to Get A 580 Credit Score Home Loan In 7 Simple Steps?

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When it comes to buying a house, you have to take many different aspects and factors into consideration. Becoming a homeowner and purchasing a house are both long time investments that require thorough planning for the present as well as the future. One of the determining factors when it comes to buying a house is your credit score. Starting a mortgage process with low credit score can be quite daunting. However, the good news is that you can secure a good 580 credit score home loan within the right guidance. 

Let’s take a closer look at the step-by-step process of procuring a mortgage loan for your dream house. 

Step-by-Step Guide of Homeownership with 580 Credit Score:

  1. Understand What Your Credit Score Means: 

Before you start house hunting, you need to take a hard look at your credit score. An average credit score which is considered ‘fair’ by most lenders is 620. Now a 580-credit score is considered ‘poor’ by majority of lenders. This means you are considered a high-risk borrower and might not get a lot of loan options. But that doesn’t mean you can’t qualify for a mortgage option- it just means that you will need to have good mortgage lenders by your side. 

  1. Explore Loan Options Like FHA Loans: 

If you are stuck and don’t know which mortgage option is right for you then why not consider FHA loans. It is one of the best loan options which was designed for low-to-moderate income individuals, who have low FICO score of 580. The Federal Housing Administration (FHA) loan gives you the option to apply for a loan with a low-down payment of 3.5%. These loans are more forgiving and give you a chance to purchase a house with minimal savings. 

  1. Consider Saving for a Larger Down Payment: 

Now, choosing an FHA loan with only 3.5% down payment is a good idea but you can definitely increase your chances of securing better terms and conditions by saving for a larger down payment. It also increases your chances of getting an approval for 580 credit score home loan, and assures sellers and lenders that you are a serious buyer. You can start off by saving for at least 10% down payment as it eliminates the need for Private Mortgage Insurance (PMI). This helps lower monthly payment as well. 

  1. Get A Pre-Approval for a Mortgage: 

Now that you have chosen a mortgage option and have an adequate down payment ready, you can now apply for mortgage pre-approval. In the pre-approval process, the lenders will check your financial situation, pending debts, FICO score and your income to determine how much you can borrow. With a 580-credit score, the pre-approval helps give you a clear idea about which 580 credit score home loan option you can afford and can continue repaying in the years to come. It also helps you set realistic expectations and signals to potential sellers that you are a serious buyer. 

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  1. Improve Your Debt-to-Income Ratio: 

Debt-to-Income (DTI) ratio, more often than not, helps lenders determine how much of your gross income can go be used for rent and mortgage payments. DTI ratio plays a major role in getting you a good pre-approval for a 580 credit score home loan. Lenders generally prefer a DTI ratio of 36% or lower. But that doesn’t mean you can’t qualify with a high DTI. With Dream Home Mortgage, a division of Brazos National Bank, by your side, you can qualify for a pre-approval with DTI ratio of 57% for FHA loans and a 49.9% on conventional loan. 

  1. Look for Local Mortgage Brokers: 

Traditional lenders such as your local credit unions and banks don’t usually cater to low credit score buyers. But this is all changing now. Not all lenders have the same rigid credit score requirements and majority now specialize in working with buyers with low credit score. Therefore, you don’t need to settle down for the first offer you receive. Look around and compare offers. You can secure a great mortgage option especially if you have a solid financial history and a larger down payment ready. If you live in the state of Texas, then you should book a consultation with Dream Home Mortgage. 

  1. Try to Repair Your Credit Score: 

Buying a house with a FICO score of 580 is a viable option, it is always a good idea to improve this score. By improving your FICO score you get more 580 credit score home loan options as well as better term and conditions. You can improve your current credit score by simply: 

  • Repaying your bills on time each month. 
  • Reducing your credit card balances. 
  • By keeping track of your expenditure. 
  • Working out any errors on your credit report. 

Where Can You Get a Mortgage Loan With 580 Credit Score? 

Nowadays, buying a house with a 580 credit score home loan is now a possibility which requires careful planning and understanding all of your options. You can apply for FHA loans, save for a down payment, improve your DTI ratio and get in touch with a good lender. You can easily get in touch with the leading experts in the field at Dream Home Mortgage. Under the reliable leadership of Mr. Hussein Panjwani, many low credit score buyers have achieved their dream of homeownership. So, what are you waiting for? Book a 30-minute free consultation with one of their experts and start your journey of becoming a proud homeowner.   

FAQs

  • Can I get a loan with credit score of 580?

    Yes, you can easily apply for a mortgage with a credit score of 580 at Dream Home Mortgage.

  • Is 580 a bad credit score?

    A FICO score of 580 is considered a ‘low’ score by most lenders. It has a significant impact on securing mortgage options. But you can still qualify for a loan if you have a reliable lender by your side. 

  • How to get credit score from 580 to 700? 

    You can easily improve your credit score by repaying your bills on time each month, reducing your credit card balances and working out any discrepancies in your credit report.

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