What If I Have a Low Credit Score?

How your credit score affects the interest rate you pay

First of all, don’t panic. Millions of Americans are struggling with the same problem. Your dream home is still within reach.

Lenders take multiple factors into consideration when deciding whether or not to approve you for a loan. Your credit score is just one of many variables that get taken into account during the underwriting process.

If credit scores were the sole basis for determining whether or not to fund a loan, the entire economy would indeed come to a standstill. The economic conditions of individuals and families are too diverse and multifaceted for lenders to determine a borrower’s risk level based solely on their credit score.

Keep in mind, however, that simply qualifying for a home loan is not the only objective you should have when purchasing a home. You’ll also want to be confident that the interest charged with your monthly payment will fit within your budget.

Lenders offset risk by charging a higher interest rate to borrowers that are deemed to be a medium or high risk. A lower credit score may result in a borrower being charged a higher interest rate in order for the lender to mitigate risk. This is common practice and serves as justification to approve the loan in the first place. Without any measures (such as increasing the interest rate) in place to offset risk, nobody with imperfect credit would ever be able to buy a home.

Having less-than-perfect credit is not an absolute deal-breaker when buying a home. However, it’s important that you are confident that the interest rate being charged will fit into your budget.

Learning the ins and outs of home buying can be overwhelming. On top of that, uncertainty about how to navigate the real estate legal landscape can be downright frustrating. Pujol Law Group specializes in real estate law. Give us a call. We are passionate about what we do and look forward to assisting you during this critical time in your life.


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