The amount of money you can borrow with a 650 credit score will depend on the type of loan you get.
With a 650 credit score, you can potentially qualify for any of the common mortgage programs. However, how much of a home loan you can get will be determined by your income and monthly obligations.
Here are some examples of how much you may able to borrow with different types of loans and a 650 credit score:
1. Personal loan:- upto $15,000
2. Home loan:- upto $50,000
3. Auto loan:- upto $25,000
Average Mortgage Interest Rate With a 650 Credit Score:
Mortgage lenders, like other creditors, typically assign interest rates based on how risky they believe it will be to give you a loan. Borrowers are seen as having greater credit risks—those deemed less likely to repay their loans—are charged higher rates than lower-risk borrowers.
A 650 credit score, like any other FICO® Score in the fair range, will likely exclude you from getting a mortgage lender’s best-available interest rate.
Some lenders may consider a 650 FICOScore ground for denying a mortgage application altogether, but a 650 score meets many lenders’ minimum lending requirements.
It’s also sufficient to qualify for U.S. government-backed mortgages issued through the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA).
Borrowers with FICOScores of 650 are likely to be offered adjustable-rate mortgage (ARM) loans, with introductory interest rates that apply for a set number of years—typically one, but sometimes three, five, seven, or even 10—and then change annually.
ARMs can be tricky to manage since their rates and monthly payment amounts can increase significantly each year after the introductory period ends.
Because lenders determine their lending policies independently, it may be possible to find a lender that will issue you a fixed-rate mortgage with a constant rate over the life of the loan.
If your FICO Score is 650, that interest rate is likely to be relatively steep, but the payments will be more predictable than with an ARM loan.
How to Improve Your Credit Score Before Applying for a Mortgage
While a FICO Score of 650 may be sufficient to get you a mortgage, you may be able to improve your credit profile in preparation for a mortgage application within as little as six months to a year.
Taking steps to increase your credit scores could help you qualify for lower interest rates, saving you many thousands of dollars over the life of a mortgage loan.
Measures to consider for improving your credit score include:
● Pay down your debts: Reducing the amount you owe can improve your DTI ratio and make your application more attractive to lenders. If you have significant credit card debt, pay down your outstanding balances.
● Lower your credit card usage: Any reduction in credit card debt can help improve your credit standing, but you’ll reap the greatest benefits by paying down cards with high utilization rates—that is, with balances that constitute a high percentage of their borrowing limits. Lower utilization is better, and experts recommend keeping utilization for each card below 30% to avoid reducing your credit scores.
● Avoid new debt: Credit checks associated with new credit applications can cause temporary reductions in your credit scores. These typically rebound within a few months as long as you keep up with your bills, but to keep your scores as high as possible when applying for a mortgage, it’s wise to avoid applying for other loans or credit cards in the months before you seek a home loan.
● Pay your bills on time: Late payments on loans or credit card accounts have a major negative impact on credit scores, and mortgage lenders see them as a bad sign. The single best habit you can adopt to encourage credit score improvement is to pay your bills on time every month, without fail.
A 650 credit score can be a solid platform for getting the house you need. It can help you qualify for a mortgage, but it’ll likely carry a fairly steep interest rate. It’s also a score you can build on to help you get a more affordable loan, today or in the future when you refinance or buy a new home.
What kind of loan can I get with a 650 credit score?
With a 650 credit score, you can typically access various types of loans, including personal loans, auto loans, mortgages, or credit cards. However, the specific options available to you and their terms may depend on the lender’s policies and your financial situation. Some options available for someone with a 650 credit score include:-
1. Conventional home loans
2. USDA home loans
3. VA home loans
4. FHA Home Loans
The interest rate for a mortgage with a 650 credit score:
With a credit score of 650, your mortgage interest rate would be approximately 3.805%. For a $300,000, 30-year old, this would cost you about $203,541 in interest.
If you could increase your credit score by even 30 points you stand to save over $25,000. According to lender411, mortgage rates for a credit score of 650 on 30-year fixed-rate mortgages are at 2.99%. The 15-year fixed rates are now at 2.56%.
How to get a personal loan with a 650 credit score
No matter what type of credit product you’re pursuing, it’s always a good idea to shop around for the best rates and terms. Before you take on a personal loan that accepts a credit score of 650, do your research and see which loan will cost you the least in the long run.
You can apply for a personal loan by …
● Researching potential lenders and ruling out any that don’t operate in the state where you live, or that don’t offer loans to people with fair credit.
● Reviewing each lender’s minimum and maximum loan amount requirements to ensure you can get the loan amount you need without taking out more than you need.
● Inquiring about the fees charged by each lender you’re considering, such as loan origination fees.
● Confirming whether the lender charges a prepayment penalty for paying off your loan early.
● Prequalifying for the loans you’re interested in so you can get an idea of whether or not it’s worth applying and incurring a hard credit inquiry.
● Once you get your pre-approvals back, compare the loan amounts, APRs, fees, and repayment terms that come with each loan to determine which is the best fit for your needs and which will cost you the least.
Minimum credit score to buy a house FHA:
An FHA loan is a type of mortgage insured by the Federal Housing Administration (FHA) and issued by approved third-party banks and mortgage lenders.
One of the primary benefits of FHA loans is that they have less stringent financial requirements than other types of home loans. This includes lower credit score minimums. If you don’t qualify for a conventional mortgage—and your credit score is primarily to blame—you may want to consider an FHA loan.
How Credit Score Requirements for an FHA Loan Are Determined
1) Risk appetite:- Lenders with higher risk appetites are more willing than others to work with borrowers with lower credit scores. As such, you can expect these types of lenders to have lower credit score requirements.
2) Investor requirements:- Many lenders sell the FHA loans they originate to investors on the secondary mortgage market, where they’re often pooled together and packaged as mortgage-backed securities.
The pricing of mortgage-backed securities is partly influenced by interest rates, which means investors may have their own credit score requirements for the loans they purchase.
Generally, the lower the credit score, the higher the risk for investors, resulting in higher interest rates for borrowers.
3) Compensating factors:- In some cases, borrowers with low credit scores may still be eligible for an FHA loan if they can demonstrate what’s known as compensating factors.
Compensating factors are additional strengths in your financial profile that can help offset a lower credit score. These include cash reserves, low non-housing debt, residual income, a steady employment history, and a larger down payment.
BOTTOM LINE:-
Monitor your credit report for errors or inaccuracies that could negatively affect your score. You can obtain free copies of your credit reports annually from each of the three major credit bureaus. If you find any errors, promptly dispute them.
Building good credit takes time, and there are no quick fixes. Be patient and make consistent efforts to practice responsible credit habits. Your credit score will improve gradually as you establish a positive credit history.
