Can I Buy a Home with a 650 Credit Score?
If you’re considering buying a home with a 650 credit score, you’re still in the game. While a 650 score is categorized as "fair," you can qualify for mortgage loans like FHA, VA, and USDA, which offer flexible terms.
Though you may face higher interest rates, there are loan programs designed to work with your credit score. Ready to get started? Rate’s Same Day Mortgage can help you pre-qualify quickly.
Is a 650 Credit Score a Good Score?
A 650 credit score is considered “fair” by most credit bureaus. It’s not a poor score, but it doesn’t unlock the best interest rates either.
Lenders typically view a higher score more favorably, but you can still secure a mortgage loan with fair terms.
While you might face higher interest rates or a larger down payment, understanding your options and preparing financially can make homeownership possible.
How Does a 650 Credit Score Impact Mortgage Rates?
A 650 credit score can significantly influence the type of mortgage rates you qualify for. Because lenders view you as a bit riskier than someone with a higher credit score, they might offer you a higher interest rate.
Mortgage lenders typically look at your FICO score, credit report, and payment history when determining the interest rate for your mortgage loan.
What Mortgage Rates Can You Expect With a 650 Credit Score?
For a 650 credit score, mortgage rates tend to be higher compared to what someone with a “good credit score” would receive.
This might not sound ideal, but don’t worry—you can still find competitive rates if you shop around and compare offers from different lenders.
Some lenders might even offer specialized loan programs that cater to borrowers with fair credit scores.
How to Improve Your Mortgage Rate With a 650 Credit Score
While your score might not get you the lowest interest rate right now, you can take steps to improve it.
Consider paying down your credit card balances to lower your credit utilization rate, avoid taking on new debt, and make all your monthly payments on time.
Even a small boost in your credit score can make a big difference in the long term.
Why Mortgage Rates Differ for FHA, USDA, and VA Loans
Mortgage rates aren’t the same across the board, especially for government-backed loans like FHA, USDA, and VA loans.
Each of these loan types has its own requirements and benefits, so your interest rate will vary based on the type of loan you choose.
FHA loans, for example, are more lenient with credit score requirements, while VA loans often have better terms for military personnel.
Which Types of Home Loans Are Available for a 650 Credit Score?
Even with a 650 credit score, there are several home loan options available. Borrowers with fair credit scores often qualify for government-backed loans, such as FHA loans, VA loans, and USDA loans.
These types of mortgage loans have flexible credit score requirements and offer more lenient terms compared to conventional mortgage loans.
However, conventional loans are also an option, but the minimum credit score requirement is usually higher, and you may need to compensate with a larger down payment.
FHA Loans: An Accessible Option for Low Credit Scores
FHA loans, backed by the Federal Housing Administration, are popular among borrowers with lower credit scores. They have more relaxed credit score requirements, making them accessible for those with a 650 credit score.
These loans often come with lower down payment requirements and flexible loan terms, making homeownership more attainable for first time home buyers and even existing homeowners looking to refinance.
FHA Loan Requirements for a 650 Credit Score
For a 650 credit score, FHA loans generally require a down payment of at least 3.5%. Borrowers are also required to have a steady income and demonstrate a reliable credit history with no recent late payments.
Keep in mind that mortgage insurance is mandatory for FHA loans and will be added to your monthly mortgage payments, which can increase the total loan amount over time.
USDA Loans: For Those in Rural Areas
If you’re looking to buy a home in a rural area, USDA loans might be a great fit. These loans are designed for low- to moderate-income borrowers and come with zero down payment options, even for those with fair credit scores.
USDA loans are particularly beneficial for families and individuals purchasing property in rural areas, as the program is meant to promote rural development and homeownership.
Eligibility Criteria for USDA Loans With a 650 Credit Score
With a 650 credit score, you’ll need to show a steady income and meet specific requirements based on the property’s location. It’s also important to maintain a low debt-to-income ratio (DTI) to qualify.
Check with your loan officer to see if your real estate purchase qualifies under the USDA loan program and confirm that the property falls within a designated rural area.
VA Loans: Best Option for Veterans
VA loans are ideal for veterans and active-duty service members. These loans offer significant benefits, such as zero down payment, no mortgage insurance, and competitive interest rates.
Even with a 650 credit score, you can still get favorable loan terms. VA loans are often more flexible with credit score requirements, making them a top choice for military personnel and their families.
VA Loan Benefits for a 650 Credit Score
VA loans for a 650 credit score can provide more lenient loan terms and lower interest rates compared to conventional mortgage loans.
The Department of Veterans Affairs guarantees a portion of these loans, which reduces the risk for lenders and allows borrowers to benefit from more favorable conditions.
This makes it easier for veterans and their families to achieve homeownership without worrying about stringent credit score requirements.
Pros and Cons of Getting a Home Loan with a 650 Credit Score
A 650 credit score doesn’t disqualify you from getting a mortgage, but it does come with its advantages and disadvantages.
Pros:
- You can qualify for government-backed loans like FHA, VA, and USDA loans, which cater to borrowers with bad credit
- Programs like Fannie Mae offer flexible options, making it easier to secure a mortgage with lower credit
- VA loans often have no down payment and lower rates for military personnel, even with a fair credit score
Cons:
- Expect higher interest rates and monthly payments compared to borrowers with higher credit scores
- Lenders will carefully review your reports from Equifax, Experian, and TransUnion
- You may face stricter requirements, such as a larger down payment or higher scrutiny in your loan application
Can I Get a Conventional Loan With a 650 Credit Score?
Yes, you can get a conventional loan with a 650 credit score, but it may not be easy. Lenders offering conventional loans often prefer a higher credit score, typically 700 or above.
However, if you have a solid credit history, a low debt-to-income ratio, and can make a larger down payment, you might still qualify.
Conventional loans may also come with private mortgage insurance (PMI) if your down payment is less than 20%, which will increase your monthly payments.
How to Qualify for a Conventional Loan With a 650 Credit Score
To boost your chances, work on improving your credit score or save up for a larger down payment. Lenders also consider factors like your credit utilization, credit limit, and payment history, so keep those in check.
Having fewer open credit accounts and maintaining a good credit utilization ratio can also help. You might need to demonstrate stable income and low debt levels to offset your fair credit score.
Risks and Drawbacks of Conventional Loans With a 650 Credit Score
While a conventional mortgage is still possible, you might face higher interest rates and less favorable loan terms. Be prepared for a potentially higher down payment or stricter conditions to secure the loan.
Additionally, having a lower credit score can lead to a smaller loan amount, so consider weighing all your options carefully before proceeding.
What Is a Realistic Credit Score to Buy a House?
A realistic credit score range to buy a house generally falls between 620 and 700. With a 650 credit score, you can still qualify for FHA or VA loans, which tend to be more flexible.
It’s a good idea to review your score from Equifax, Experian, or TransUnion before submitting your mortgage application. Avoid taking on new credit or making big purchases that could affect your score.
What Credit Score Is Needed for a 300k House?
To buy a $300k house, a good credit score is typically needed. Conventional loans often require a score of 700 or higher. However, a 650 credit score can still qualify you for mortgage options like FHA loans or VA loans.
If you’re applying for a conventional loan with a lower score, you might need to compensate with a larger down payment. Before applying, it’s smart to check your score with major credit bureaus to ensure accuracy.
What Income Do You Need for a 300k Mortgage?
Income plays a key role in qualifying for a $300k mortgage. Lenders generally want your monthly mortgage payment to be no more than 28-36% of your income. For a mortgage of this size, you’d need an income of roughly $75,000 to $85,000 per year.
Your loan application will also involve a close look at your personal finance situation, including any student loans or personal loans to assess your risk.
How Much Is a Monthly Payment on a 300k House?
The monthly payment for a $300k house will depend on the loan’s interest rate and term. For a 30-year fixed loan at 4%, you’re looking at about $1,430 per month before taxes and insurance.
Higher rates due to a bad credit score or taking on new credit could raise your payment. Refinancing down the line is an option if your financial situation improves and you want a lower rate.
How Can I Get Pre-Approved for a Home Loan?
Having a 650 credit score doesn’t mean you have to settle for less when it comes to your home loan options.
With the right mortgage strategy, you can still qualify for various loans, including FHA, VA, and USDA, or even a conventional loan with a larger down payment.
Plus, if you're already a homeowner, you may be able to refinance your mortgage to improve your financial situation or access your home equity.
If you’re ready to take the next step, why wait? With our Same Day Mortgage, you can skip the long waits and get pre-approved for a home loan faster than ever.
Apply today and discover how simple homeownership can be, no matter your credit score!
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