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“I want to apply for a loan to buy a house in Washington State, but I currently have bad credit. Is there any way I can qualify for a home loan with a low credit score?”
This is a common lament from home buyers who have dealt with credit issues in the past. It’s a tough question to answer across the board, because every lending scenario is different. Here’s what you should know about applying for a home loan in Washington State with “bad” credit.
There are a few things that lenders will look at to determine whether or not you will be able to secure a mortgage, as well as what kind of interest rate you can get.
Your income, debt levels, and assets will play a role in your ability to get approved for a mortgage, but so will your credit score. This number gives lenders an idea of how responsible you are with your finances.
A high score typically means you’ve been diligent with your bill payments, while a lower score generally means that there are likely late or missed debt payments in your past. If that’s the case, your credit score may suffer and your ability to secure a loan – including a mortgage – may be compromised.
Having said that, you may still be able to get a mortgage with bad credit, but you may have to go about it a different way.
If you’re paying cash for a home, your credit score won’t be an issue since you’re not using a mortgage loan. But if you’re like most home buyers in Washington, and you need a loan to help finance your purchase, then your credit situation will come into the picture.
Credit scores are just one aspect of the mortgage qualification process. Lenders use these three-digit numbers (along with supporting documentation) to get a sense of how you have borrowed and repaid money in the past.
As for the minimum credit score needed to qualify for a mortgage loan in Washington, there is no single cutoff point for all situations. It can vary based on the type of loan you are using, your current debt-to-income ratio, and other factors. Generally, lenders today prefer to see a score of 600 or higher for home loan approval. But again, it can vary.
There are other factors that come into play when you apply for a mortgage loan. These include your debt-to-income (DTI) ratio, the size of your down payment, cash reserves you have in the bank, and other variables as well.
Strengths in some of these other areas could offset a bad credit when you apply for a home loan. For example, a borrower with less-than-perfect credit might still qualify for a mortgage loan in Washington State, if they have plenty of money in the bank and a large down payment.
It’s the big picture that matters most to lenders. And your credit score is only one aspect of that bigger picture.
The bottom line is that borrowers shouldn’t automatically assume their credit scores are too low for a home loan. The only way to find out for sure is to speak with a mortgage broker or loan officer — like us!
Recap: Can you qualify for a home loan in Washington if you have bad credit? That depends on where your credit score lies, and what caused it to drop in the first place. The type of home loan you are seeking will also play a role. For instance, FHA loans generally have more leniency when it comes to credit scores, compared to conventional home loans. Additionally, strengths in other areas could help offset any credit-related issues.
If you’re considering applying for a mortgage in Washington State, Sammamish Mortgage can help. We are a local mortgage company based in Washington state and serve Oregon, Idaho, and Colorado as well. Our mortgage financing professionals can work with you to help you determine which one of our mortgage programs is right for you. Contact us today with any questions you have about home loans in Washington.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.