Is a Good Credit Score Required for Home Ownership in Georgia?

Don't let bad credit steal your dream of owning a home.

Owning a home is a large part of the American Dream for most Americans. That dream can sometimes feel out of reach for those with less than perfect credit. Aspiring homeowners in Georgia, like most other states, will typically need to qualify for a mortgage loan with a local or national lender to buy a home. Credit plays a large part in the mortgage loan qualification process. However, although bank financing is a popular way to achieve home ownership in Georgia, additional options are available.

How Much Does Credit Matter?

Your credit score helps determines two very important aspects of the mortgage lending process: loan approval and interest rates. Typically, a credit score of at least 620 is required for mortgage loan approval. However, along with other considerations such as your debt-to-income ratio, assets and employment history, this score requirement could be re-evaluated in either direction. Once you receive loan approval, your credit score is then used, along with other factors such as the home's loan-to-value, to determine the amount of repayment risk you pose and thereby the rate of interest you will be require to pay on your loan. The higher your credit rating, the lower the amount of interest charged on your loan.

Owner-financing

In the event that your credit score prevents you from obtaining traditional bank financing, other financing options are available. Generally harder to locate than bank financing, owner-financing is an excellent option for borrowers with credit issues. Owner-financing is when the property owner holds a private mortgage on the home and payments are made directly to her. An owner willing to hold a private mortgage may be more lenient on credit issues, provided that you have stable employment history, viable assets and can make a substantial down payment.

Lease Purchase

Lease purchasing is excellent option for borrowers with credit issues. A lease purchase allows you to put money down on a home and make monthly lease payments -- a portion of which, will be applied to the purchase of the home after a set period of time. Typically lease purchase agreements terms are between 12 and 36 months. During this time, the borrower lives in the property as if it were his own, makes monthly lease payments that serve as a way of saving towards the purchase of the home and has the term of the lease to work on repairing his credit in order to qualify for traditional financing at the end of the lease.

Georgia Home Ownership Programs

The State of Georgia offers its residents numerous home ownership education programs which provide information on credit repair, down payment assistance and the mortgage lending process. People with credit issues and other barriers to home ownership should take advantage of the assistance these programs provide. The Georgia Department of Community Affairs provides information on many of these programs on its website: dca.ga.gov.

References

• Home Buying Institute: Your Credit Score
• Georgia Department of Community Affairs: Home Buyers

Resources

• Georgia Department of Community Affairs: Get on the Right Track to Homeownership