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Posted in: Buying a home, Getting a mortgage

Can I get a mortgage if I have a low credit score?

Low credit score mortgage help

Your credit score has a significant impact on the loan rates you'll be offered when you apply for a mortgage. So, what happens if you have a low credit score?

Pay a little more

Those with damaged credit can still qualify for a loan, but they may have to pay a higher interest rate. Borrowers with a credit score of 760 or higher are likely (but not guaranteed) to obtain the lowest mortgage rates available. Meanwhile, those with a lower score could be approved at a higher interest rate. Remember: the higher your loan rate, the more you'll pay over the course of the loan.

Consider FHA loans

Another option is to take out a Federal Housing Administration (FHA) loan. The FHA is a U.S. government agency that backs lenders, and it is more likely to offer mortgages to those with damaged credit. If you're having trouble saving for a down payment, FHA loans also allow borrowers to pay as little as 3.5 percent down. 

What's the catch? FHA loans require buyers to purchase mortgage insurance, which is a high upfront fee. Buyers will also be expected to pay mortgage insurance monthly over the course of the loan.

What happens if I'm not approved?

If you aren't approved for a mortgage, it's time to work diligently on increasing your credit score. Plus, speak to a home mortgage consultant to determine how you can get on track for approval.

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