Buying a House With Credit Score of 580

Reader Question: Buying a home with credit score of 580 means what regarding the loan?

To be perfectly honest (which is what we do here), I would be surprised if you could get a mortgage loan right now with a score in the 580 range. Most lenders will consider this a subprime borrowing situation. And as you probably know, these types of loans have become all but extinct over the last year or so.

Turn on the news right now, and I can practically guarantee that you'll see something about the current economic crisis, and how banks are all sweating bullets right now. Many financial institutions have already failed, and many more are operation in what I call "self-preservation" mode. Basically, everyone is afraid to lend money right now. And those lenders who are still offering loans have increased their lending criteria.

Another reader / home buyer asked a similar question about buying a home with a credit score less than 600 points, so I recommend giving that Q&A session a read as well.

I wish I had better to news to offer, but I don't. I do have some good advice though. Stay where you are for right now, and focus on improving your credit score. If you increase your score into the mid 600 range -- or, better still, into the 700s -- you'll have a much easier time qualifying for a loan. You'll also get a better interest rate on the loan, which means a smaller mortgage payment each month.

Good luck to you.