As a general rule, yes you can. However, you will have to shop around for a lender. You will not be given the best rates. And, the terms and conditions will be a bit lopsided. Below are a few things you want to consider to increase your chances of getting approval for a mortgage with a low credit score.
What is a Low Credit Score When It Comes to Home Loans
The 2012 National median credit score is 692. However, based on statistical data, most home loan providers require a consumer to have a higher score. The 2012 home loan average credit score (for approval) is around 734. Take note, this is only the average score, not an excellent one. Suffice it to say any score below 734 is low. However, you do not want to be so low as to go below the “all around” national median credit score of 692. In other words, when it comes to a home loan any score below 692 is not low, but bad.
The Down Payment
The higher your down payment the higher your chances go getting mortgage approval. The usual minimum down payment is 10%. For you to substantially increase your chances, anywhere between 25 to 50% or higher is your goal. This works two ways. Number one, this serves as “show money” and no lender will ignore a substantial cash amount, direct from the buyer. Second, this works to lower your total loanable amount. The lower the loanable amount the higher the chances of getting loan approval on a mortgage with a low credit score.
A mortgage is an arrangement that attaches to a loan. This means that the property bought becomes a security for the fulfillment of the terms of the contract. Otherwise the same will be sold or applied to the debt. A mortgage on a property with a stable and high resale value within a good neighborhood and near basic necessities will be an easier deal than an out of nowhere location. Remember, the lender thinks ahead and in the worst case scenario. The same will not mind you defaulting and them acquiring on foreclosure, a highly marketable property. But they will not be too accommodating to grant a mortgage with a low credit score, if the property is not easily marketable.
Amount and Source of Income
Lenders will want positive data on the consumer to offset the negative or low credit score. Consumers with permanent jobs that pay well are preferred. At the very least they want to see a net income to loan amount of ratio f 30% max. This means that the amortization payments will not go beyond 30% of the net disposable income of the consumer.
What’s on Your Report?
In some cases it is not the score that is important, but the information found therein. Some lenders will assess a consumer based on the score and then based on specific reported information. For example, a low credit score because of dozens of credit card debts that are paid after it is due, but paid nonetheless is not as bad as a charge off or a previous bankruptcy filing, or a judgment involving fraud.