Purchasing a home is a significant financial decision, and for most people, it requires taking out a mortgage. While there are many factors to consider when applying for a home loan, your credit score is one of the most critical.
In Mississippi, a credit score of at least 650 is typically required to qualify for a mortgage. Fortunately, there are many mortgage options available for those with a 650-credit score, and by exploring them thoroughly, you can maximize your chances of getting the home loan you need. In this article, we’ll take a closer look at the different types of home loans available in Mississippi, what you can do with a credit score of 650, and how to increase your chances of securing a mortgage that works for you.
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Is a 650 Credit Score Good for Buying a House?
A credit score of 650 is considered fair, but it may not be enough to qualify for the best interest rates and terms on a mortgage loan. However, it is possible to buy a house with a 650-credit score if you have a stable income, manageable debt-to-income ratio, and other factors that lenders consider when evaluating your loan application.
Keep in mind that lenders will look at more than just your credit score when determining your loan eligibility. They will also consider your income, employment history, savings, and the amount of debt you currently have. In addition, having a higher down payment or a co-signer may increase your chances of being approved for a mortgage with a 650-credit score.
It’s important to note that if you do get approved for a home loan with a 650-credit score, you may face higher interest rates and less favorable terms compared to someone with a higher credit score. This could result in paying more interest over the life of the loan, which means a higher monthly payment.
In short, while a 650-credit score may be good enough to buy a house, you may have to work harder to qualify for a mortgage and may face higher costs than someone with a better credit score.
How Much of a Home Loan Can I Get with a 650 Credit Score?
The amount of a home loan you can get with a 650-credit score will depend on several factors, including your income, debt-to-income ratio, down payment, and other financial considerations.
In general, with a credit score of 650, you may qualify for a home loan, but you may not be able to secure the best interest rates and terms available. Lenders may consider you a higher risk borrower and may require a larger down payment or higher interest rate to compensate for that risk.
As a general rule, most lenders prefer a debt-to-income ratio of 43% or lower. This means that your monthly debt payments, including your new mortgage payment, should not exceed 43% of your gross monthly income. However, some lenders may accept a higher ratio depending on the circumstances.
Assuming a debt-to-income ratio of 43%, a 20% down payment, and a 30-year fixed-rate mortgage with an interest rate of 4%, you may be able to qualify for a home loan of around $150,000 with a credit score of 650. Keep in mind that this is just an estimate, and your actual loan amount may vary depending on your specific financial situation and the lender’s requirements.
What Kind of Home Loan Can I Get with a 650 Credit Score?
With a 650-credit score, you may be able to qualify for different types of home loans, but the options available to you may be more limited compared to someone with a higher credit score. Here are some of the types of home loans that you may be able to get with a 650-credit score:
- FHA Loans: These are government-backed loans that are designed to help borrowers with lower credit scores and down payments. With an FHA loan, you may be able to qualify with a credit score as low as 500, but a score of at least 580 is typically required to make a down payment of 3.5%.
- VA Loans: These loans are available to veterans, active-duty military personnel, and their spouses. VA loans do not have a minimum credit score requirement, but lenders may have their own requirements.
- USDA Loans: These loans are designed for borrowers in rural areas who have low to moderate incomes. USDA loans typically require a credit score of at least 640.
- Conventional Loans: These are loans that are not backed by the government. With a conventional loan, you may be able to qualify with a credit score of at least 620, but a higher score may be required to get a better interest rate and terms.
- Adjustable-Rate Mortgages (ARMs): These are loans that have an interest rate that adjusts periodically over the life of the loan. ARMs may be an option for borrowers with lower credit scores, but they can be riskier because the interest rate can increase over time.
Overall, the type of home loan you can get with a 650-credit score will depend on the lender’s requirements, your financial situation, and the type of property you are buying. It’s important to shop around and compare loan options to find the best one for your needs.
The Bottom Line
In Mississippi, the amount of a home loan you can get with a 650-credit score will depend on several factors, including your income, debt-to-income ratio, down payment, and the type of loan you qualify for. With a credit score of 650, you may qualify for different types of home loans, such as FHA, VA, USDA, conventional loans, and adjustable-rate mortgages. However, you may not be able to secure the best interest rates and terms available, and you may need to meet stricter eligibility requirements. It’s important to shop around and compare loan options to find the best one for your needs, and to consider factors beyond just your credit score when evaluating your loan eligibility.