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Buying a home with a less than pristine credit score is still possible. But you need to know where to look and what other factors play into the mortgage-lending decision. We're here to help.
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The average credit score for homebuyers seeking a 30-year fixed-rate mortgage is 755. That rate applies to what are known as conventional, conforming loans. Those are mortgage loans for 80 percent of the value of the property for an amount of up to $453,100 nationally, but that could be higher in high-cost areas.

So how can you buy a home with a credit score of less than around 650? The answer is it depends on where you want to buy, how much you want to borrow, and how likely is it that you'll make your payments after considering all your other debts.

There are then three major factors that determine whether or not you can get a mortgage: your credit score, the loan-to-value (LTV) ratio, and the debt-to-income (DTI) ratio. The two federally regulated agencies that buy mortgage loans from lenders, Fannie Mae and Freddie Mac, have eased both their LTV and DTI limits, making it easier to qualify on those two factors.

By making it easier to get a mortgage, could the United States be headed for another housing crisis like the one that hit the housing market in 2007? In those bad old days, it was much easier to get a loan because mortgage lenders could make loans that required no documentation of a borrower's income. The loans could then be packaged into a tradable security and re-sold to investors who had no idea what they were buying. Mortgages today must be fully documented, and while they can be packaged as securities, the rules are much stricter concerning the quality of the loans in those packages.

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Fannie and Freddie will now accept fully documented loans with an LTV as high as 97 percent loan to 3 percent down payment. Last year the two agencies lifted their DTI ratios from 45 percent to 50 percent. In some cases, loans that meet these requirements can be had for buyers with credit scores as low as 580. The pros at Realtor.com explain:

So how do you snag a home mortgage without an excellent credit rating? It's largely a matter of what government loan programs are available in a specific area—and those vary substantially. The U.S. Department of Agriculture, for example, sometimes offers no-money-down loans to borrowers whose scores are below 640—but only for homes in a rural ZIP code.

Federal Housing Administration loans, among the most popular government-backed mortgages, allow borrowers with credit scores as low as 500 to qualify with a 10 percent down payment. (They must have scores of 580 to snag loans that require only 3.5 percent down payments.) But plenty of sellers choose not to accept them if they have other offers.

As with all real estate transactions, whether or not you can get a mortgage with a low credit score also depends on location, location, location. Researchers at Realtor.com calculated the share of mortgages in the largest 200 U.S. metros obtained with a 649 credit score or lower. The share of mortgages was calculated over a 12-month period from July 2017 through June 2018.

Here are the 5 cities with the most home buyers who had credit scores of 649 or lower:

  1. Charleston, West Virginia
    Median home listing price: $147,300
    Share of borrowers with low score: 39.1 percent
  2. Clarksville, Tennessee
    Median home listing price: $209,950
    Share of borrowers with low score: 35 percent
  3. Corpus Christi, Texas
    Median home listing price: $239,750
    Share of borrowers with low score: 35 percent
  4. Lakeland, Florida
    Median home listing price: $229,500
    Share of borrowers with low score: 30.4 percent
  5. Augusta, Georgia
    Median home listing price: $218,000
    Share of borrowers with low score: 26.5 percent

Now, here are the 5 cities with the fewest home buyers who had credit scores of 649 or lower:

  1. Santa Cruz, California
    Median home listing price: $936,000
    Share of borrowers with low score: 4.3 percent
  2. Fargo, North Dakota
    Median home listing price: $257,050
    Share of borrowers with low score: 5.4 percent
  3. Ann Arbor, Michigan
    Median home listing price: $350,000
    Share of borrowers with low score: 6 percent
  4. Durham, North Carolina
    Median home listing price: $356,300
    Share of borrowers with low score: 7.2 percent
  5. Boulder, Colorado
    Median home listing price: $612,550
    Share of borrowers with low score: 7.3 percent

Visit the Realtor.com website to find other cities where a low credit score is (and is not) the primary determinant of your ability to buy a home.

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