Mortgage rates continue to be at all-time lows attracting many to get a mortgage to purchase a new home. However, if you have a low credit score you may think you don’t qualify for a loan – but you would be surprised.

There are options available and recommendations someone with a low credit score can take to help better position themselves for buying a new house.

Loans are often categorized based on credit score ranges. Credit scores ranging from 500 to 580 have fewer options than those with a score above 600. However, a government backed FHA loan and a non-qualified mortgage are options and recommended for someone with a credit score between 500 and 580.

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FHA loans are backed by the Federal Housing Administration and in addition to being an option for those with low credit scores, these loans don’t carry additional fees and won’t necessarily have higher interest rates. The borrower may have to put up to 10% down, but this is still a good choice for those with low credit scores.

When someone’s credit score is 600 or greater, there are more loans to consider. One popular one in rural areas is a USDA loan because of the zero down payment requirement, however, this loan is only available in qualifying areas so it is important to check if where you want to live is covered by this loan.

The interest rate and the amount of money needed to put down are often the two factors that have the biggest impact on a loan for someone with a low credit score. Most lenders will require a minimum of 620 credit score in order to qualify for a conventional loan.

There are two options that are more friendly to those with a minimum credit score of 620 – the Freddie Mac Home Possible buyer program and the Fannie Mae HomeReady loan. These are options for low-to-moderate income borrowers and first-time homebuyers. Additionally, there are other government assistant programs and grants for first-time homebuyers that are important to research when beginning the home buying process.

Having a high credit score will give you access to better loans and more options. So, if your score is low, take steps to improve it. First step, pay down your credit card balances and improve your payment history. Next, check your credit report for accuracy. Mistakes happen and when you see an error you can report it to hopefully correct your report and score. Limit your other debt – for example, prioritize whether you want to buy a new home or a new car.

Navigating mortgage options is complex so regardless of your credit score, working with a trusted advisor and mortgage broker is essential so that you understand your options and all of the details related to the loan requirements.

Homie Loans aims to set buyers up with the best possible loans, rates and terms. Even if you’re not buying a house with a Homie agent, buyers can still use the services provided from Homie Loans. For more information visit


Dan Richards is senior vice president of Homie Loans.