The number 609 is deemed a fair credit score, indicating that it is lower than the good credit score which is considered to be 670-739. However, having a credit score of this nature does not entirely exclude you from being able to purchase a house through mortgage financing as it only comes with added costs such as higher interest rates on the mortgage, and may require a higher down payment. Here are some recommendations that can help you understand Credit score 609 for buying a house.
Finally, getting approval for a mortgage
The first step is even getting a mortgage in the first place to come up with the money that is required. Traditional loans have a minimum score that must be met and usually ranges from 620-640, but with your score of 609, you may not qualify for some of these conventional loans. Nevertheless, FHA loans are the easiest in this regard requiring the borrower to have a FICO score of at least 580. Well, it appears that an FHA loan is probably going to be your best shot. You will likely also seek a mortgage broker who can go and seek different creditors to find one that will finance for a 609 score.
Down Payment Requirements
If you have an FHA loan and your credit score is 609, you will be expected to at least pay 10% of what is needed for down payments. If the home costs $200,000 that is equivalent to a $20,000 down payment. Non-conventional lower credit score loans are usually available with a 20-25% down payment. Fortunately, there are FHA loans that give buyers with low credit scores the option of low down payments. It is also wise to check on state and local down payment assistance programs that offer grants or repayments that can help out with down payment money sufficient or part of it.
Interest Rates
The level of credit score that a person holds has a very close relationship with the level of interest rate that the person will be subjected to and at the same time, interest rates are at large at the current times because of economic factors. Current interest rates: For an FHA loan and a 609 credit score, you will be able to obtain an interest rate of 6-7 presently. That is translated into increased monthly charges for the mortgage and also a higher interest expense for the longevity of the loan. Raising your credit score before getting a mortgage might mean that you freeze at a good rate and end up saving a great deal in the long run.
Preapproval and Debt-to-Income Ratio
When beginning the home search process, learn your loan prequalification or preapproval. This involves your lender evaluating your credit worth, income, assets, and liabilities, among others to ascertain your ability to repay the loan amount to be forwarded to you. If you have a credit score of 609, the lenders will consider you risky and will analyze debt to income ratio which is the total amount of debt repayment against total gross income. They have found that a higher DTI is directly proportional to the risk of lending. FHA loans will approve DTIs of up to 57%, but the exact lender may limit the allowance of this ratio to a lower level if the borrower has a low score. The following can enhance this ratio: Reducing liabilities can enhance this ratio.
Boosting Your Credit Score
While it is crucial to try and improve your score in 609 before applying for a mortgage, any increase between 50-60 points can notably affect your interest rate. Some tips to improve your score include: Some tips to improve your score include:
- For the remaining bills, always make timely payments from that point on because payment history is a key component of scores.
- Reduce credit card and revolving loans
- Even if your credit report holds a low score, you should engage in the process of disputing any error that may be present.
- Only apply for new credit once you are at the final stages of finalizing a home.
This is why even the most minor of score enhancements can end up putting you in the proverbial bank thousands of dollars over the term of your mortgage.
Shopping For A House
It is still wise to get a mortgage pre-approval as soon as possible but refrain from pursuing a house with fervor until within one month of the desired closing date. Credit inquiries, such as when you apply for a new credit account, may result in a temporary decline in your scores. Consult a professional real estate salesperson who knows your financial capabilities in terms of purchasing a property and the kind of loan you can qualify to get. Your credit and finances may be checked again at the last minute before closure; therefore, be prepared to update your lenders.
With a credit score of 609, someone can own a house, albeit they will face some issues such as high interest rates on the financing making it costly in the long run. If you can increase your score, even slightly before applying for a mortgage, you are exposed to more financing options and better rates. Work with loan officers and other real estate agents familiar with counseling individuals with poor credit scores and getting them into homes. If one is to pay cash or use proper credit management to secure a down payment, it is possible to purchase a house with such a score as 609.
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