1. FHA Loan (Federal Housing Administration Loan)
Credit Score Requirement: As low as 500 (with 10% down) or 580+ (with 3.5% down).
Best For: First-time homebuyers and those with lower credit.
Pros: Low down payment, flexible credit requirements.
Cons: Requires mortgage insurance premiums (MIP).
2. VA Loan (Veterans Affairs Loan) (For eligible military members & veterans)
Credit Score Requirement: No official minimum, but lenders may require 580-620+.
Best For: Veterans, active-duty military, and qualifying spouses.
Pros: No down payment, no private mortgage insurance (PMI), competitive interest rates.
Cons: VA funding fee required.
3. USDA Loan (United States Department of Agriculture Loan)
Credit Score Requirement: 580+ preferred, some lenders may allow lower.
Best For: Buyers in rural or suburban areas with low-to-moderate income.
Pros: No down payment, lower mortgage insurance costs.
Cons: Must meet income and location eligibility.
4. Subprime or Non-Qualified Mortgage (Non-QM Loans)
Credit Score Requirement: 500-620+ (varies by lender).
Best For: Borrowers who don’t qualify for conventional loans.
Pros: Flexible underwriting standards, alternative income verification.
Cons: Higher interest rates and fees.
5. Conventional Loan (With a Non-Traditional Lender)
Credit Score Requirement: Typically 620+, but some lenders allow lower with compensating factors.
Best For: Borrowers with a higher down payment or strong income history.
Pros: No upfront mortgage insurance if you put 20% down.
Cons: Stricter credit requirements, PMI required if <20% down.
Tips to Improve Mortgage Approval with Low Credit
Increase your down payment (higher down payments can offset low credit).
Work on improving your credit score before applying.
Look for lenders specializing in low-credit borrowers.
Consider a co-signer or joint application with someone with better credit.
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