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September 30, 2024 at 4:33 pm #1002KikoffKeymasterSeptember 30, 2024 at 5:07 pm #1036KikoffKeymaster
A credit score of 650 falls into the “fair” credit category. This means that you’re not in the ideal range but also not in the risky range when it comes to home loans. While this credit score won’t give you the best mortgage rates, you are still qualified for a home loan.
Available Loan Types
- FHA Loans: The Federal Housing Administration (FHA) offers loans for borrowers with lower credit scores. With a 650 score, you can qualify for an FHA loan with a down payment of just 3.5%. These loans are more accessible, but they come with mortgage insurance, which adds to the overall cost of the loan.
- Conventional Loans: You can qualify for a conventional loan with a 650 credit score, however, you’ll need to make a larger down payment of about 10-20%. Conventional loans have stricter requirements, but if you can meet them, they usually have better terms than FHA loans.
- VA Loans: This is only an available option if you’re a veteran or an active service member. There’s no official minimum credit score for VA loans, but most lenders prefer a 620 credit score standing. So 650 would be able to qualify you for one.
Other Factors that Affect Your Home Loan
- Income: Lenders want to see a steady income that could support your mortgage payments. The higher your income, the more likely you can secure a larger loan.
- DTI (Debt-To-Income Ratio): The lower your DTI, the more likely you can secure a larger loan. Lenders look at how much of your income is going towards an existing debt, to evaluate whether they should be taking a risk on giving you a loan.
- Down Payment: A larger down payment usually compensates for a lower credit score. If you put down 10-20% of the home’s price, it usually qualifies you for a larger loan and better terms.
Interest Rates for 650 Credit Score
One downside when it comes to getting home loans for a credit score of 650 is that you might have higher interest rates of around 4.5%-5.5%. Whereas for someone who has a credit score of 700 and above, their interest rates would usually be lower than 4%.
Final Thoughts
Although 650 isn’t a perfect credit score, you can still get a home loan with some smart planning. There’s no fixed maximum loan amount tied directly to a specific credit score like 650, as lenders consider several factors beyond just your credit score. However, with a credit score of 650, you can expect some limitations on how much you can borrow, but you could still qualify for a decent loan.
Let Kikoff Help You!
Kikoff is an easy and affordable way to start growing your credit, on average, users with credit 600 saw a +28pt* improvement in their first month! Starting from $5 a month, you can easily grow your credit with Kikoff, with no credit checks, no hidden fees, and no interest. Sign up in minutes and start growing your credit now for better home loan terms and interest rates!
*First-month credit score impact of +28 points in a first month based on observed changes in Equifax VantageScore 3.0 for Kikoff users with starting credit below 600 who made at least one purchase with Kikoff Credit Account & one-on-time payment between Jan-2021 & Mar-2024. Late payments may negatively impact your credit score. Individual results may vary.
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