Bad Credit Home Loans in Minnesota
Learn more about bad credit mortgage in MN
If you’re nervous about applying for a home loan in Minnesota because of a bad credit score, don’t be. Mortgage loans for applicants with a less-than-perfect credit score might be harder to secure, but getting approved isn’t impossible. If you’re finally ready to make the transition from renting to owning but are still worried about FOBD (fear of being denied), learn more about bad credit home loans in Minnesota below and what steps you can take towards finally realizing the dream of home ownership.
What is bad credit?
Before we go any further, let’s first establish what having bad credit means. Credit scores, sometimes referred to as a FICO score, range from 300 all the way up to 850. A credit score of 850 is perfect, and anything 740 or higher is labeled as good credit. When your credit score falls below 700, lenders will start to question your risk but that doesn’t mean you won’t automatically be denied a mortgage.
What are your options?
Having bad credit complicates the home buying process but it’s also not the end of the world. Just like with anything else, you’ll still have a few options to consider when it comes to bad credit home loans in Minnesota. Let’s dive deeper into it below…
Consider a low credit score home loan
One option to consider is a FHA loan. Along with not needing as much money down, FHA loans only need a minimum credit score of 580 in order to be approved. Keep in mind, however, that FHA loans also require mortgage insurance, which may bump up the interest rate and/or your monthly payment.
Put more money down
If you have bad credit but also the ability to put more money down, lenders will be much more likely to approve a home loan. Simply put, more money down helps minimize the risk to the lender, and it also reduces the risk that the borrower will walk away as well. Even increasing your down payment to 25 or 30 percent can make a huge difference. It’s worth noting, though, that your bad credit score may still impact your interest rate.
Be open to paying a higher interest rate
Many borrowers can qualify for a low credit mortgage with a higher interest rate. Of course this means you’ll pay significantly more money in interest over the life of the loan. But this at least enables you to purchase a home now and perhaps even refinance down the road once your credit score improves.
Check your credit score for errors
While you may already know your credit score isn’t perfect, it’s also worth the time to go through your credit report and double check it for errors. Creditors have been known to make a mistake here and there, and a recent Federal Trade Commission survey even found that one in four Americans find errors on their credit reports.
