Your credit score plays a vital role in determining the level of risk you pose to lenders. A higher credit score translates to lower risk, increasing your chances of qualifying for a mortgage with a more favorable interest rate. For home mortgages, the standard credit score utilized is the FICO score. FICO derives this score by considering the mid-range value from the three primary credit bureaus: Experian, Equifax, and TransUnion. These bureaus assign a credit score ranging from 0 to 850, using various reporting criteria (refer to the images below for a detailed breakdown of a credit score).

A low FICO credit score may result from credit issues such as late payments or bankruptcy, or it could be due to a limited credit history. As a first-time buyer, establishing a positive credit history through responsible management of smaller purchases like credit cards or car loans helps mortgage lenders gauge your financial responsibility.

Having bad credit can significantly impede your ability to purchase a home. Rebuilding and improving credit takes time, and it’s important not to speculate about your credit status or the necessary steps for credit repair. Your Intercap loan officer can provide you with an accurate assessment of your current standing and guide you on the path to qualifying for a home loan. Developing a solid plan is the most effective way to overcome obstacles posed by low credit scores.

Typically, there are certain waiting periods to consider before qualifying for different types of home loans. For a VA loan, it is generally necessary to wait two years after a foreclosure or short sale. To obtain an FHA or USDA loan, the waiting period is usually three years. Meanwhile, qualifying for a conventional loan may require a waiting period of seven years. In the case of a Chapter 13 bankruptcy discharge, the wait time to qualify for a home loan could potentially be shorter. To determine the exact timeline for your specific situation and to understand any necessary steps for purchasing your next home, it is recommended to reach out to your Intercap loan officer. They will provide you with accurate information regarding your eligibility and guide you accordingly.