Lenders with strict credit requirements are not exactly uncommon. Things may seem challenging when you have your eyes on the home loans for low credit scores in Chicago, IL. But don’t worry – you can find multiple home loans!
In this article, we mention the most popular home loan programs in Chicago, IL. Let’s check out!
Non-qualified Mortgage Programs
Have you heard of a qualified mortgage? The government is responsible for setting the guidelines of qualified mortgages to develop safe mortgages by putting a lid on high-risk products. Now, the rule remains in effect because the loan program requires 600 credit scores. However, this particular type of loan needs a down payment and private mortgage insurance.
On the other hand, non-qualified mortgages have flexible guidelines. If the banks cannot sell the home loans to investors, they can design their criteria. This means a low credit score requirement might not be something surprising. You can find non-qualified programs that have a minimum credit score requirement of 500. Nevertheless, finding an FHA loan is not challenging – some lenders allow 580 credit scores for a 3.5% down payment.
However, there is a drawback for non-qualified home loans. You might be stuck with a higher rate than the conforming programs. When your credit score is low for a mortgage, you might have to wait for a fair amount of time.
Conventional Loan Programs
Non-government conventional loans might leave you with a high-interest rate and fee. You can apply for conventional loans administered by Fannie Mae and Freddie Mac. Credit score and loan-to-value ratio are two main factors in conventional loans. When the loan-to-value ratio increases and the credit score takes a plunge, the loan rate surcharges.
For example, a buyer with a 20% down payment and a credit score above 700 might pay 1.25% of the mortgage amount. If the borrower has a credit score of around 640 and a 10% down payment, you might be charged 2.75% of the loan amount. Low credit scores take a toll on your monthly mortgage payments and might cause a high-interest rate.
You can find a conventional loan for applicants with low credit scores. Nonetheless, 620 is the minimum credit requirement you are likely to face.
In the end, Clear Lending can help you find the loan program you deserve. So, contact ASAP!
