Mortgage Credit Scores under 500

Mortgage loans for credit scores under 500: Like other lenders, mortgage companies assess risk by charging different interest rates based on your risk of default. As bad credit mortgage loans are secured by assets that can be seized, most mortgage lenders keep loans to 80% of the value of your home, which provides some protection to the lender in case you default and they have to foreclose.

When you buy real estate, lenders make their decisions based on the "big three" credit bureau reports. Each credit reporting agency lists your credit history together with government records. Each report assigns a mathematical credit score which reflects how likely you are to default on the loan.
 

How mortgage lenders assign credit scores

You have three credit scores - sometimes called FICO scores - from each credit bureau. The mortgage lender usually takes the middle score as the starting point. Mortgage lenders have different scoring models, however, a "C" score is usually around 500 to 600, followed by a "B" score (600 to 680), and an "A" score (680 and above). Over 700 is excellent and will secure a loan at the best rate of interest. However, if your score is under 500, you will likely have difficulty finding a lender prepared to take the risk. An alternative may be to seek private financing.

How Real Estate Lenders Rate You

Mortgage refinancing credit scores:
720 - 800 Excellent. You get the best deals
700 - 719 Extremely good. You get top rates & terms
680 - 699 Good! You get good rates & terms
660 - 679 Above average. You pay higher costs & rates
640 - 659 This score is okay if you have good income
620 - 639 Weak. You need good income & some money
600 - 619 Poor. Use creative loan broker & pay more loan costs
580 - 599 Almost impossible to obtain a loan without a large down payment
Under 580 Bad news. You'll have to Work on fixing your credit
 

Here's what does not count in determining credit scores

The scoring model doesn't compute:

Age & gender
Race
Whether you own a home or rent
Length of time at your current address
Job or length of employment at your job
Income
Education
Marital status
Whether or not you've been turned down for credit.