4 Thoughts on can i get a home loan with a fico score of 501??
  1. Reply
    February 5, 2014 at 3:47 am

    Anyone can get a home loan, much like a car loan, BUT… something happened somewhere that lowered your score. Make sure that doesn’t happen again. The issue now is how much interest rate are you willing to pay? The lower the score, the higher the interest. You are better off saving for a really good down payment which will lower your interest rate, your payments, and show the banks that you can afford it. Take a look at your credit reports. You may have some errors there that will raise your score drastically. Shop around for your pre-approval all at one time so there aren’t so many “dings” on your credit report which will end up lowering the score even further. Banks will overlook a search during a short period of time more than they will if there are inquiries every week or month for months and months and months. Unless you are so hot to buy a home, take your time to increase your score. Your interest rate and monthly payments will thank you and you’ll have more money to put down. Remember, housing cost is more than just mortgage… consider insurance, maintenance, moving expenses, higher utility costs, deposits, etc. Make SURE you can afford what you are wanting. Low credit scores are often a sign of future foreclosures.

  2. Reply
    Nichole O
    February 5, 2014 at 4:27 am

    I am a Certified Mortgage Planner.

    Simple answer is yes. As long as you have breath in your body you can obtain a mortgage. The more complex part is, with that credit score, how much will you have to bring in as a downpayment. In todays market, even subprime lenders (the ones who cost the most in terms of rates) are going to require that you bring in 10-15% with that low of a score. You can bring that money from a variety of sources, but you still have to have it. And depending on the dollar amount you are looking at buying, it can be alot. On a $ 100,000. that is $ 10-$ 15K cash.

    But, there is FHA, which doesn’t look at the score, but will look at other factors such as why your score is low. FHA only requires just over 3% down, but there are alot of hoops to jump through. And the rates for a 30 year fixed mortgage will be much better than you could get somewhere else.

    Here is what I do with my clients (and what I recommend you do too).

    Usually I deal with capacity first, but in your case I would deal with the credit issues first (since there definitely have to be some to have a score in that range.) I would analyse your credit report and get a basic idea of what is pulling your score down. Here are some examples of things tha can do that:
    collection accounts – are they something you can take care of? If yes, just do it, just letting them hang there, isn’t going to help. They don’t go away and in many cases get passed around from agency to agency and keep getting refreshed.
    late pays (on anything) – don’t do it anymore. get 6-12 monthes of current pay history.
    judgements – if they are not satisfied, find out how you can do so.
    charge-offs – cross-reference them with collections, try to get them taken care of.
    high balances on available credit – pay down to about 35% of available credit.
    too much credit with balances – pay stuff off, DO NOT CLOSE the lines of credit. That will lower your score.
    bankruptcies – how old?
    tax liens – state or federal – find out from what and get them paid.
    incorrect information. – dispute it, do everything in writing, certified mail to all bureaus reporting it. And they have 30 days to validate or remove it.

    You need to be honest about what is on your report, and if you don’t understand how to read it or what is there, you need to get with someone who can help. I don’t recommend credit counseling as a first step since it can have an impact on your credit as well. I would recommend finding a mortgage planner (find somone who is actually a planner, not just a loan officer – we have more education and develop long term relationships with our clients that can last years as we move through this process – that is not to say loan officers don’t, but typically someone who has taken the steps to get certified has more experience in the planning portion. Which you need.)

    Second is capacity – what you can truly afford
    Third is the home itself.

    Deal with why your score is low first. The difference in what you can do from a 501 to a 601 is HUGE. It may take time, but if you are not in a hurry to buy, take the time to fix the problems with your credit, you will reap the benefit of time well spent in terms of how much money you save in rate and term on that new mortage.

    If you would like any more information on what I do to help my clients resolve these issues. I would be happy to discuss it with you, I don’t charge for the service and am happy to help in any way I can. [email protected]

    Good luck with this!

  3. Reply
    February 5, 2014 at 4:37 am

    yes you should be able to get 100% financing as long as you dont have any judgements(if so will have to be paid)

  4. Reply
    stephen l
    February 5, 2014 at 5:31 am

    Yes, you will likely need a downpayment of between 3 (FHA if you qualify) and 20%. I know a loan officer who can help you with that and more. I recommend First National Banc Corp. They do business in most states and are your best opportunity for someone to say yes. ADDITIONALLY, IF YOUR CREDIT IS SUSPECT, THEY SOMETIMES FRONT THE MONEY TO GET YOU INTO A CREDIT RESTORATION PROGRAM SO THAT YOU CAN QUALIFY FOR A LOAN. Check out the free evaluation form at the source website and a First National loan officer will contact you within 24 hours. Good luck.

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