While it’s true that credit scores are one of the first things lenders check, if you’re someone with bad credit, don’t lose hope. A credit score is not the end-all of your journey toward purchasing your dream home in Pittsburgh, PA.
You might be surprised how possible it is to secure a mortgage with a lower credit score. Be aware that this could mean interest rates are higher, but nevertheless, it is possible to acquire a mortgage. Lenders will check four primary factors when determining your qualification for a loan:
- Income or employment and length of employment
- Credit score and overall credit history
- Assets, including savings and investments
- Amount of down payment
So, even if you have a bad credit score, there are many loan opportunities available to you. Not sure if you have bad credit? Click the first question on this page.
In this article, you will learn more about additional factors that are considered in the loan searching process as well as loans available to Pittsburgh, PA, homebuyers with bad credit.
Factors Considered in the Mortgage Loan Securing Process
As we have mentioned, there are a number of factors that go into determining which loans you qualify for. Here’s more information on each:
1. Income or Employment and Length of Employment
A well-earning buyer with extensive employment history who also has bad credit can still establish trust with a lender. These factors can signal to the lender that the buyer will be able to make the mortgage payments on time.
Income can also determine debt-to-income (DTI) ratios, which you can determine by adding up your monthly debts and dividing that number by your pre-tax monthly income.
2. Overall Credit History
Even if your credit score is bad now, your credit history can suggest it hasn’t always been that way. For example, if your credit dropped due to hard times, your credit history can signal this to your lender.
While it’s still possible to acquire a mortgage with bad credit, here are some ways you can start building credit back up.
3. Assets
One of the things borrowers forget to consider is their savings. For lenders working with borrowers with bad credit, they want to see that a borrower has solid savings after paying the down payment and closing costs. This establishes trust between the lender and borrower that, in the case of unemployment, the borrower will still be able to pay the mortgage.
4. Amount of Down Payment
While a 20 percent down payment isn’t necessary, it can help signal to the lender that you have the funds required to make your monthly payments. To make sure you have the budget for monthly payments, here’s a tool to help you better understand your financial situation.
Options for Bad Credit Home Loans in Pittsburgh, PA
Once you have a better understanding of your financial situation, here are some of the most popular bad credit home loans Pittsburgh, PA, residents should consider.
FHA Loans
If you receive a loan from the Federal Housing Administration (FHA), the FHA insures the loan so that the lender can offer you a better deal. Here are some highlights of this loan:
- The down payment can be as low as 3.5 percent of the house’s value.
- Borrowers can qualify for the loan with a 580 credit score.
However, you can still qualify for this loan if your credit falls between 500-579 if your down payment is at least 10 percent. There are a number of FHA loans, which you can learn more about here.
VA Loans
Veteran Affairs (VA) helps make homeownership possible for members of the military by providing VA home loans. These loans are provided by independent lenders. Here are some of the highlights:
- They require little to no down payment.
- They don’t require mortgage insurance.
- There is no minimum credit score.
While the final point is true of the VA, the lender might have their own minimum credit score requirements, which typically fall in a range between 580-660.
USDA Loans
To qualify for a U.S. Department of Agriculture (USDA) home loan, borrowers must purchase property in rural, and some suburban, areas. Borrowers must prove stable and dependable income.
While the USDA does not require a minimum credit score, a lender providing this loan typically requires a credit score of 640. Depending on the lender, lower credit scores can be eligible but are subject to more stringent requirements to secure the loan.
Conventional Mortgages
Conventional loans are often a popular choice because they offer lower payments. For homebuyers, the down payment is 3 percent—unless the property is not single-family, which increases the down payment to 15 percent.
While a credit score of 620 is typically required to qualify for this loan, a higher income or down payment could make it easier to qualify for this loan if your credit score is below 620.
Ways the Right Lender Finds the Right Loan for You
radius financial group is a customer-obsessed mortgage loan company here to help you find your dream home in Pittsburgh, PA. We understand that you’re more than just your credit score and that this shouldn’t be the barrier so many people believe it to be.
When you connect with a Loan Officer, they will be able to determine which loan is the right one for you based on the many factors we’ve gone over in this article—not just your credit score.
To learn more about the home-buying process in Pittsburgh, PA, check out our page on first-time home buying.
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