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Reaping the Benefits of Lower Cost Mortgages While Avoiding the Risks


Yes, it is possible to get a mortgage when your credit score is lower than 670.  Some lenders will even consider your application if your credit score is as low as 620.  Your options will be limited as far as the amount you can borrow, though.  With less-than-optimal credit scores, the interest rates on a home mortgage will also be higher.  Therefore, unless you can put together a bigger down payment, thereby reducing the total amount that you will need to borrow, then you might want to look into lower cost alternatives to conventional mortgages.  Because these mortgages cost less in the beginning, they are also riskier in the long term, so you should only choose them after carefully considering whether you can afford to borrow them.  For advice about getting your credit score in the best possible shape, contact a Boca Raton credit repair lawyer.

If Not Conventional Mortgages, Then What?

Conventional mortgage loans, with their terms set by the federally authorized lenders Freddie Mac and Fannie Mae, are out of reach of most first-time homebuyers.  They require a down payment of at least three percent of the purchase price of the house, and they will not even consider lending to you unless your credit score is at least 620.  These loans also require the buyer to cover the closing costs.

If you cannot afford a conventional mortgage, the most affordable choice is a special homeownership program, such as a local affordable home ownership program, a VA mortgage, or a USDA mortgage.  These programs have limited availability, though, as well as strict requirements for participation.

If You Choose an Adjustable-Rate Mortgage, Get the Longest Possible Fixed Rate

One lasting effect of the housing market crisis of 2008 is that people are aware of the dangers of adjustable-rate mortgages.  It is generally easier to qualify for an adjustable-rate mortgage, but the costs add up eventually.  The interest rate remains steady for a predetermined time, but after that, it increases every six months or every year.  An adjustable-rate mortgage is not just a bad idea if the time until the rate starts to adjust is five years or more.  You can spend that time paying down the principal so that you can refinance or cope with the new interest rates without your monthly payment becoming unaffordable.

If You Assume Someone Else’s Mortgage, Get All the Details in Writing

Assumable mortgages have gone in and out of popularity over the years.  In this arrangement, someone else has taken out the mortgage loan, usually at a time when interest rates were much lower, and you simply take over the payments.  At first, it sounds like a win-win situation, but there is plenty of room for ambiguities.  Make sure you work out all the details with the previous owner, get everything in writing, and review the agreement with a lawyer before you agree to take on such a mortgage.

Work With a Debt Lawyer About Affordable Home Ownership

A South Florida debt lawyer can help you strategize so that you can afford to buy a house without ruining your finances.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.



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