When consumers learn that they have a 500 credit score, it is natural for them to wonder if they can qualify for a mortgage with such a low credit score. When you consider that even people with bad credit may acquire home loans, it's more logical to ask, "What sort of mortgage loan should I get for my house?"
Unfortunately, terrible credit means you won't be able to reach the minimum credit score required to qualify for standard or conventional loans, which are the mortgage types most commonly selected if you want to save money. To obtain this type of loan, you will need to work hard to improve your credit score and save up a higher down payment.
However, they will be in the form of government-insured loans. These loans demand that you purchase a home only for the purpose of living in it as your primary residence. You'll learn about many types of 500 credit score home loans in Virginia, below.
VA Loans
Veterans Administration Loans VA loans are home loans that are fully financed and guaranteed by the Department of Veterans Affairs. Because the VA has no credit score requirement, the minimum credit score required will vary per lender. Most VA lenders demand a credit score of 580 to 620 to be qualified.
● A minimum credit score of 580-620
● There is no money down.
● Mortgage insurance is not needed.
FHA Loans
They have the lowest credit requirements of any home loan type. Borrowers with a credit score of 580 require a 3.5 percent down payment. With a credit score of 500, you may be eligible for a 10% down payment, but there are few FHA lenders that will work with scores below 580.
● A minimum credit score of 580 with a 3.5 percent down payment
● A maximum debt-to-income ratio of 50%
● After a bankruptcy, there is a 36-month waiting period.
USDA Loans
USDA loans are insured by the United States Department of Agriculture and are available to low-to-moderate income homeowners who are purchasing a property in an eligible rural location. To be eligible, you must have a 620 credit score and an income that is less than 115 percent of the AMI.
● 100% financing with a credit score of 600 or higher
● Income less than 115 percent of AMI
● The house must be in a USDA-eligible area.
Lenders use more than simply your credit score when assessing eligibility. Even if you fulfill the credit score threshold, your loan may be refused if you have recent late payments or bankruptcy.
