Advice for First-Time Home Buyers with Poor Credit - Quicken Loans Zing Blog

Your credit score is one of the key factors that mortgage lenders consider when you’re applying for a home loan. But if you find yourself on the lower end of the credit score spectrum, don’t worry – homeownership could still be a reality for you.

With rent on the rise and home values increasing, 2017 is a great year to buy a home. So don’t let poor credit keep you out of the market. Here are some tips for approaching the mortgage process if your credit score is lower than you’d like it to be.

Know What Score You Need

Your credit score affects whether you can get approved for a mortgage as well as what your interest rate will be. Higher credit scores will generally give you more mortgage options. At Quicken Loans, a credit score of 660 or higher will give you a wide range of options.

If you’re interested in a conventional loan, you’ll need a minimum credit score of 620. However, you can qualify for an FHA loan with a score as low as 580.

Discuss Credit Issues with Your Mortgage Lender

Talk to your mortgage lender about your credit score. Perhaps your credit score is a result of identity theft or previous challenges that no longer affect your financial stability. Be sure to have your payment records and other documentation beside you to help verify your case for a home loan.

Get Credit Errors Fixed

Carefully review your credit report to ensure its accuracy. Keep in mind that the balances shown may be slightly off due to recent payments that have not yet been recorded. If you do find an error in your report, you can send a written dispute letter to get it fixed. This is worth the effort as it could raise your credit score and open up more loan options to you.

Review These Options for Buyers with Poor Credit

Make a Larger Down Payment

You may have the option to compensate for your low score by putting more money down. This makes you less risky to your lender as you’ll have more invested in the home and be less likely to walk away from it.

If you don’t have the cash for a large down payment on hand, look for assets that you can liquidate without taking large losses. For example, your retirement account could be a source of cash for your down payment.

Another way to fund your down payment is with gift money from relatives. However, the amount of gift money you use can actually affect the mortgage type for which you qualify. Learn more about how using gift money impacts your loan approval with our guide to using gift money for your down payment.

Take a Higher Interest Rate

If your score is high enough, you can apply for a mortgage now and accept a higher interest rate. If you rebuild your credit over the next few years, you may be able to refinance your home at a lower interest rate. One thing to keep in mind is that you have no guarantee that lower interest rates will be available when you’re ready to refinance.

Get an FHA Loan

You can qualify for an FHA loan with a score as low as 580. An FHA loan may also be beneficial because it allows for a co-borrower who does not reside in the home. This means that a trusted friend or relative can cosign your loan so you can become a homeowner.

Rent and Rebuild Your Credit Score

If now isn’t the right time for you, another option is to rent for a couple more years while you rebuild your credit score.

Paying more attention to your finances is essential to improving your credit score. Mint.com is a popular tool for people who want to do just that. It’s a web-based application that aggregates your financial information and allows you to set up alerts, create budgets and track investments for free.

Don’t let a low credit score stop you from investing in a home. First, find out where your credit stands with a free credit report from QLCredit. Then, talk with a Home Loan Expert to see what your options are.

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This Post Has 96 Comments

  1. Hi,

    My credit score is 690,i make 65k, and would like to put 40k as a down payment ,how much is the probability for me getting a conventional loan and if yes,how much of interest rate do you think is considered to be good on this loan?

    1. Hi Suny:

      I can’t comment on your chances for approval here on the blog because I’m not a licensed Home Loan Expert. What I can tell you is that it sounds like you have a decent sized income with a sizable down payment and your credit score is just fine. What’s missing here is your debt-to-income (DTI) ratio. DTI measures how much of your monthly income goes toward paying off monthly debt amounts including both revolving and installment debt payments. In order to get a more realistic feel for your approval chances, you can get a preapproval online through Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716. Hope this helps!

      Thanks,
      Kevin Graham

    1. Hi Frans:

      I can certainly offer some tips to help you get where you need to be. The first thing you should do is constantly be aware of your credit. If you’re aware of what’s wrong, it’s easier to work to improve it. Check out our friends at QLCredit. You’ll be able to get your free VantageScore 3.0 credit score and report from TransUnion every two weeks along with personalized tips on how to improve based on the information in the report. This blog post also has some good general tips on how to improve your credit. Finally, once you’ve done all those things, I’m going to recommend you give one of our Home Loan Experts a call at (888) 980-6716. They may be able to help you come up with a plan to get across the finish line.

      Thanks,
      Kevin Graham

    1. Hi Rudy:

      Letters of explanation sometimes help, but you do need to be above the minimum FICO score. One thing to note is if you keep up good habits, your credit score should improve over time.

      Thanks,
      Kevin

  2. Hi my 7bkrpcy was discharged 5/2016. I am in the 600’s now for my credit score and want to use part of my 401k for down payment. I have never had a mortgage before, presently my DTI is around 25%. When will I be able to be approved for a mortgage? Thanks

    1. Hi Courtney:

      We do have one program where we might be able to help you right now. You would also have an FHA option starting two years after the bankruptcy has been discharged. I’m going to recommend you start by speaking with one of our Home Loan Experts. They can be reached at (888) 980-6716 and would be able to walk you through all of your options now and down the line. Thanks for reaching out!

      Kevin Graham

      1. Hi Kevin,

        I saw in your comment that you can help me to get a house with my bad credit .My credit score is almost 530.

        Please can you contact me so that we can talk about that?

        Thank and best regards.

        JOSEPH

        1. Hi Joseph:

          Before we can help you with a mortgage, your credit score needs to be at least 580. With that being said, we do have some resources we can give you. I’m going to recommend you check out this excellent blog post on improving your credit. I’m also going to recommend you check out QLCredit. They’re able to give you your TransUnion VantageScore 3.0 credit score and report every two weeks for free and without impacting your score. The key point here is that you not only see the information on the report, but also tips on how to improve your credit. As a final step, you can then talk to one of our Home Loan Experts who might be able to come up with a plan to get you across the finish line. You can reach us at (888) 980-6716.

          Thanks,
          Kevin

  3. Please help! My credit is very poor. I think it’s like 430 or less. But my husband score is 680 or more. I would like to file for bankruptcy or chapter seven and let him put the home in his name while I build my credit. Is this a good idea? And we really would like to buy a new home and stop renting. Just married!!

    1. Hi Evelyn:

      I’m going to recommend that you and your husband speak with one of our Home Loan Experts before taking any further steps. It might also be advisable to speak with a bankruptcy attorney. What I can tell you is that if you live in a community property state, your credit and debts may affect his ability to get a home depending on what type of loan you’re trying to get. I think the best immediate step for you would be to talk to someone by calling (888) 980-6716. One of our experts can walk through your situation.

      Thanks,
      Kevin Graham

  4. My husband has a score of 584 and I have a 594. We’re looking to buy a mobile home (2006 built) on leased land for $150k with $15k down in California. What are the options we have with gross income of $60k?
    We’re both working on getting derogatory marks off of our credit reports, however we’re hoping to buy as soon as possible to avoid throwing money away on rent anymore!

    1. Hi Annelore:

      Unfortunately, we don’t do any lending on mobile homes. We aren’t really the best lenders to talk to on this. It’s a specialized category and although I can’t recommend any in particular, a Google search will probably help you out.

      Thanks,
      Kevin

  5. I’m trying to figure out if I should try to buy or rent for longer? Have 3 things on my credit, 10k car repo from 2005, 6k arears child support, and a small hospital bill. Credit score is 535 and last year’s income 33k for me and 30k for my girlfriend, with 3 daughters

    1. Hi Jeff:

      I can tell you that your credit score needs to get at least up to 580 before we can help you with an FHA loan. I think your next step would be to get a look at your credit report from our friends at QLCredit. You can pull your credit for free without affecting your score in order to get an idea of where you stand. You’ll also get personalized tips on what you can do to improve your credit based on the information in your report. If you want, you could also speak with one of our Home Loan Experts by calling (888) 980-6716. They may be able to offer tips based on your circumstances.

      Thanks,
      Kevin Graham

    2. If the car repo was from 2005 you can file a dispute with all 3 credit bureau to have it removed. Negative credit are only allowed to be reported to your credit report for a total of 7 years by law. That should have been removed from your report in 2012.

  6. Hello Kevin,

    So my question is my credit score is around a 588 and my husband is at a 660-670 range. We are first time home buyers with a annual income of about 118,900.00. We have about 5-6k to work with do you think we’d qualify?

    Thank you,
    Amber

    1. Hi Amber:

      Based on your credit score, you may qualify for an FHA loan if you both want to be on the loan. There are factors beyond credit and income that go into your qualification including debt-to-income (DTI) ratio. We would have to take a further look at your options to see what the best loan would be for you. I’m going to recommend you talk to one of our Home Loan Experts by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

    1. Hi Nico:

      It depends on where you’re at in the process. If the bankruptcy has been discharged or dismissed, you may have some options depending on how long ago the bankruptcy was. If you’re just filing for bankruptcy, you won’t be able to get a loan until after you’re out at the earliest. If you want to talk this over with one of our Home Loan Experts that can give you more information specific to your situation, you can call (888) 980-6716. We’ll be happy to talk to you.

      Thanks,
      Kevin Graham

  7. Hi, im a single mom looking to buy a home. I have 618 credit score and 5,000 saved for a downpayment. I make 25,000 a year. What kinda help can i get?

    1. Hi Elizabeth:

      There are many factors that go into whether or not you qualify for any given mortgage loan option. That being said, based on your credit score, we could take a look at an FHA loan for you and you’re a couple of points from qualifying for a conventional loan credit wise. You could also take a look at homeowner assistance that are offered through the Department of Housing and Urban Development (HUD) for FHA loans. I’m going to make a couple of recommendations:

      You should check out our friends at QLCredit. You’ll be able to get your credit report and score for free without affecting your score. Better yet, it’ll give you personalized tips on how you can improve your score based on the credit report analysis. If you can get up to 620 and sustain it, it’ll enable us to offer you a wider array of loan options.

      You should also talk to one of our Home Loan Experts about your situation and we can see if we have any options that make sense for you. You can reach out to us by filling out this form or calling (888) 980-6716. I hope this helps!

      Thanks,
      Kevin Graham

  8. can i get a loan from quicken loans if i have a foreclosure on my credit? it hasnt been 3 years yet, but my credit is 628. also what is the minimum amount of a loan i can get? i was told for homes banks wont loan anything less than $60,000. i was looking to get a loan somewhere around the 40-50k range

    1. Hi Eddie:

      We can definitely look at your options. We may have a couple of loan programs we can take a look at for you. We don’t have a specific loan minimum although there may be minimums associated with certain loan programs. I’m going to suggest you talk to one of our Home Loan Experts by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

    1. Hi Aaron:

      I’m going to recommend you talk to one of our Home Loan Experts by giving us a call at (888) 980-6716. They’ll be able to go over your situation with you and offer some tips on how to build up your credit at the very least. We also have this blog post on building up your credit that you may find helpful. Good luck and hopefully we can get you on the right track soon!

      Thanks,
      Kevin Graham

  9. Hi I have credit of 734 and I make about 45k yr. I don’t have much saved only about 4K and I’m looking for a house. I can use my 401k money but I’d rather not. Will I qualify for FHA and what percent would I need to put down?

    1. Hi Danielle:

      Based on your credit score, you would qualify for both an FHA and a conventional loan. I would take a look at a conventional loan in your case because the minimum down payment for an FHA loan is 3.5% and you can go a little lower with conventional programs. I’m going to recommend you talk to one of our Home Loan Experts by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  10. I have poor credit, and it will be my first time buying a home. I make around between $54,000 and $60,000 a year, is there a way i can get a FHA loan with low credit score?

    1. Hi Paul:

      The minimum credit score we accept on FHA loans is 580. I’m going to recommend that you check out our friends at QLCredit. You can pull your own credit for free without affecting your score and get updates on a monthly basis. Even better than that, they give you advice on how to improve your score.

      If you get your credit up to the point where it qualifies, you should definitely reach out to one of our Home Loan Experts. You can do that by filling out this form or calling (888) 728-4702.

      Thanks,
      Kevin Graham

  11. Im 32 im a law enforcement i make about 41,000 a yr and i want to get a home my credit is about 650 but i have a high credit to debt ratio

    1. Hi Melissa:

      Depending on how poor your credit score is, it could be hard to get a mortgage. You need at least 580 score before we can help you with an FHA loan. I’m going to recommend you talk to our friends at QLCredit. They can give you personalized advice on how to improve your credit based on pulling your credit report for free without affecting your score.

      Thanks,
      Kevin Graham

  12. I have poor credit but everything on my credit report is over 10-15 years old, I’m wanting to see if it’s possible to get a FHA home loan to buy my first home.

    1. Typically, when you get ready to buy a home, you want some accounts on your credit report that are newer. I’m going to recommend you check out our friends at QLCredit. You can check your credit report for free, without affecting your score. You will get personalized tips on how to improve.

    1. Hi Richard:

      If you have poor credit, the good news is it can be worked on. This blog post will give you some general tips on typical issues that can be dealt with. We also have a partner in QLCredit that can give you your credit report and score as well as personalized recommendations on where you can improve.

      Thanks,
      Kevin Graham

  13. I am 36, credit score is around 635, I make $95k/year, but have no savings and really only about $290 of revolving debt (student loans). What are my options for a mortgage? Is a no-money down option available to me?

    1. Hi Kelly:

      The only no down payment options that we offer are through the VA. However, we do offer a 3% down payment option at your current credit score and there’s a 1% down option if you get your credit score up to 680. I hope this gives you an idea of where you stand.

      Thanks,
      Kevin Graham

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