What Is the Easiest Type of Mortgage to Get Approved For?
Whether you’re a first-time homebuyer or have been through the process before, comparing your mortgage options can certainly feel overwhelming. While it might be tempting to go with the first affordable-seeming option you come across, the fact that the average mortgage loan takes up to 30 years to pay off underscores the importance of doing your research and securing favorable terms. Otherwise, the extra interest can really add up over time, which could cause additional, undue stress down the road.
Ultimately, not all mortgage loans are created equally, so keep reading to get a handle on the types of mortgage loans you should have on your radar as you look to make your dream of home ownership a reality.
What Factors Qualify You for a Mortgage?
Whether you opt to go through a bank or credit union, lenders consider a number of factors when determining whether or not to approve you for a mortgage. While credit score is widely understood to be the most important factor, it’s rarely the only factor that’s considered. It’s also worth noting that would-be borrowers without an established credit history may still be able to secure a mortgage loan, and some lenders may accept alternative documentation.In addition to credit score, which gives lenders an idea of how likely you will be to pay off your loan on-time, The Motley Fool lists 4 additional factors:
- Debt-to-Income Ratio, which—as you might assume—refers to the relationship between how much you make and how much debt you’re carrying (including new debt you will carry, if approved for the mortgage loan).
- Down Payment, since the more you can pay up-front, the less you’ll need to borrow and pay off over time.
- Work History, which provides lenders with some insight into your ability to consistently have an income so you can reliably make your payments.
- The Property Itself, since most mortgage lenders feel more confident financing a home that’s in good condition with an accurate appraisal value.
As mentioned, credit score is the most important factor considered by lenders—so let’s take a closer look at how much credit you’ll need to make owning a new home a reality.
What Does Your Credit Score Need to Be to Buy a House for the First Time?
For first-time buyers, most experts point to 620 as being the minimum credit score to buy a house. That being said, “Lenders set their own minimum requirements by loan type” (as NerdWallet points out), meaning it’s important to do your research before agreeing to any terms. And the higher you can get your credit score in advance of filling out those loan applications the better, since a higher score can have a significant impact on your ability to secure favorable terms.
What Are the Easiest Loans to Get Approved For?
Based on factors like the minimum credit score and how much down payment is required, a few of the easiest mortgage loans to get approved for—among traditional, government-backed options—include:
- FHA Loans, which will generally have among the lowest credit score and down payment requirements.
- VA Loans, which don’t require a down payment or a minimum credit score—but do require active military duty or veteran status.
- USDA Loans, which—like VA loans—require no down payment or minimum credit score, but do have specific requirements like living in a rural area and income below a set threshold.
Are There Mortgage Lenders That Accept a 500 Credit Score?
There sure are! If you can’t meet certain FHA loan requirements, for example, some lenders offer “no income, no credit check mortgage” options. As you might expect, the terms of these mortgages are often less favorable—including higher interest rates—since the lender is taking on a larger risk by working with you.
Do Credit Unions Offer First-Time Home Buyer Loans?
Yes! In fact, whether you’re a first-time home buyer or it’s not your first rodeo, credit unions are a great option to consider, and may provide additional advantages for first-time home buyers. For example, IMCU offers a wide range of mortgage products to meet a diverse range of needs, including:
- Fixed-Rate Mortgages
- Adjustable-Rate Mortgages (ARMs)
- FHA Loans
- VA Loans
- USDA Loans
To learn more about each of these offerings and their potential advantages, visit our Mortgage Products page.
What Are the Advantages of Working with a Credit Union (Like IMCU) Over a Traditional Bank?
There are several advantages to working with a credit union, including lower interest rates, more personal/localized service, and a wider range of mortgage product offerings to fit different lifestyles.
An ally worth having on your side, IMCU makes it especially easy to navigate the mortgage landscape. Wherever you’re at in the process—whether you’re exploring your options, looking to get pre-approved for a loan, or curious about our current specials—IMCU is ready to help.