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Finding Fair Credit Home Loans Requires Planning and Preparation

If you have a fair credit rating at the major reporting agencies you can still qualify for a home loan if you work with the right lenders.

Buying a new home? Just because you don’t have a stellar credit rating doesn’t mean you aren’t in a strong financial position. Unfortunately, many people think that having a credit rating anything below ‘Excellent’ means they aren’t ideal for applying for credit. Of course, an excellent credit rating will give you an advantage, but fair credit home loans exist.

Your credit rating is strictly a number that portrays information about your credit history. Your credit score cannot tell a mortgage company or other lender what your current income situation is and how reliable you will be in the future.

The first important thing to understand is that your fair credit rating is not bad. You can even qualify for a mortgage if you have a poor credit rating. You may need to pay more attention to how you proceed with the mortgage application process to give yourself the best opportunity to be approved and get into the house you deserve.


Recognize the realities behind fair credit home loans

A fair credit rating usually applies to any rating between 580 and 669. Realistically, you could still get a mortgage with a credit rating as low as 500, but anything lower than that, and your first focus should be on increasing your score.

The truth is, there is no set standard requirement for a minimum credit score for a mortgage. Still, individual lenders are able to set their own standards and may draw a line at certain points. One way or the other, all bad credit is not created equally.

Government-backed loans allow for lower credit scores to be accepted but also have mandatory minimums. Overall, lenders will look at much more than just your credit score when considering whether to approve you for a mortgage. Factors include your income, money available for a down payment, and your current level of debt, among other things.

Looking for fair credit home loans or building credit: Which is best for you?

Building credit is always a strong strategy to put yourself into a better situation to get approval and increase your odds at getting favorable terms for your mortgage. If you’re not in any rush to get into a home, focusing on strategies to improve your credit may be a better choice for you rather than applying for mortgages immediately.

On the other hand, don’t think you have to hold off on your plans if you have other things working in your favor. Your chances for approval can be much higher if you have a good amount of money to put towards a down payment or have strong, steady employment to pay off your debts (preferably you have both).

Places to look for loans

There are plenty of lenders that will accept credit scores below 650 and even below 600. New American Funding, Citibank, Mr. Cooper, and BNC National Bank all accept scores below 650. Homebridge, Carrington, Quicken Loans, and Rocket Mortgage all will consider lending to people with scores below 600. Each of these lenders also has programs with low required down payments of as little as 3%.

What is your biggest concern in applying for a mortgage? How soon are you looking to buy your home?


Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.