It means that the credit score of 608 is considered to be a fair credit, and the score generally ranges between 580 and 669. Because of this, it is indeed possible to purchase a house even with such a low credit score, but it can be very difficult. What you should know about attempting to acquire a house and have a 608 credit score.
The first challenge is to secure a mortgage approval despite having a credit rating of 608. Traditional loans offered on the market usually come with at least a 620 credit score requirement. FHA, USDA, and VA loans are government-backed programs with fewer strict requirements and lower minimum credit scores. Here are some options:
FHA loans – While this is not typical, the FHA will provide credit for people with scores as low as 580 and even accept scores starting at 500 though with only 10% down. An FHA loan allows you to pay a minimum down payment of 3. 5% to get a home that you have always dreamt of.
USDA loans – For those who are willing to purchase a home in a rural area, a USDA loan is ideal for candidates who have credit scores of 640 and below. However such loans will be manually underwritten for borrowers whose credit score ranges between 580-639.
VA loans - This has been found to approve borrowers with a FICO score as low as 580 provided that their income and assets are qualifying.
The downside is that such loans are backed by the government and thus the mortgage insurance premiums will increase your overall cost. And sometimes even official programs have stricter standards than lenders, so a 608 score isn’t sufficient without more elements.
Improving Your Chances
A 608 credit score gives a signal that one might have had a past credit problem and this makes the lenders provide a mortgage with some level of caution. Here are some tips for overcoming a lower score: Here are some tips for overcoming a lower score:
Credit improvement – Demonstrating consistent improvement in one’s credit in the months preceding a mortgage application is good momentum. B) Reduce the outstanding balances challenge the entries in the reports or include favorable entries.
Pay less interest – By putting more down, the interest rate will be less since the lender has more confidence in approving a risky borrower, thus, avoiding mortgage insurance.
Paying off other obligations – This means minimizing the DTI ratio so that approval can still be arranged despite the credit score being low.
Co-applicant – Sometimes, certain credit cards require a co-applicant with a better credit score to qualify for the credit card and to enjoy better rates. Just know that both of them will equally be expected to cater for the mortgage repayment of the mortgage.
Reduce non-essential credit inquiries – They can cost you a few points each and adding new credit decreases your FICO.
Self: Know lender requirements – You need to understand the requirements of each lender as they have their specific underwriting criteria. A small portfolio may be more flexible than a huge bank and do more to accommodate the borrower.
Under which Terms and Interest Rates Can You Borrow
Here are average mortgage rates and terms borrowers with lower credit scores might expect compared to someone with an excellent 740+ credit score: Here are average mortgage rates and terms borrowers with lower credit scores might expect compared to someone with an excellent 740+ credit score:
Credit limits - Anything below an excellent credit score, including a 608 score, means a credit card with a much higher interest rate, which in this case will be 2% higher. Hence you may pay 5. 5-6% compared to 3-4% for those with high credit ratings.
Mortgage fees – Due to lower credit, the total fees are higher and it charges between 1 to 3 percent of the total loan amount. Fees ensure that lenders are rewarded for taking higher risks with the security.
Mortgage points – Points are upfront charges for buying a lower interest rate, although, once again, not as low as a prime credit score borrower’s. Each point costs 1% of the loan balance for the corresponding point that has been paid.
Down payment – while possible to get a car with no money down, you can generally only get most of the options if you pay at least 10-20% of the price. Some programs may have lesser down but will have significantly higher rates or costs.
Loan term – A 15 or even a 20-year term is considerably less risky for the lenders than a 30-year term is. A shorter term also cuts interest costs significantly For example, if the interest rate is 10% pa, the following results are obtained:
Private Mortgage Insurance – If a conventional loan is taken with less than a 20% down payment then there is a PMI added to the monthly payments until a home equity is reached of 20%.
Having a 608 Credit Score For Home Ownership
Getting approval is just the beginning of the journey, however, there are still many hardships to come. A homeowner with a poor credit rating must ensure that the mortgage is paid on time even if he or she did not have a good credit rating when buying the home. Failure to make the payment on time takes your credit to the deep end and your auction home.
Do not be too ambitious while setting the monthly house-hunting budget and be certain to allow for more flexibility in case money becomes an issue. Put yourself on a process to ensure you start saving more, paying down balances, and of course, enhancing that credit. In a few years of further strategic maneuvering in the financial market, you can refinance the loan for a better rate and conditions.
Purchasing a home with bad credit means that a person is going to have to devote more than a little time to financial research. However, this is possible if we employ the right strategy and determination to realize the dream of homeownership. It is simply necessary to be consistent with the rational decision in all spheres of life including the aspects of finance.
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