500 Credit Score Mortgage Loan Calculator

Monthly Payment Formula:

\[ M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is a 500 Credit Score Mortgage Calculator?

Definition: This calculator estimates monthly mortgage payments for borrowers with poor credit (500 score), who typically qualify only for higher interest rates.

Purpose: Helps potential homebuyers with low credit scores understand their likely mortgage payments and affordability.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula adjusted for higher rates:

\[ M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Where:

$ M $ — Monthly payment ($)
$ P $ — Loan principal ($)
$ r $ — Monthly interest rate (annual rate ÷ 12)
$ n $ — Total number of payments (years × 12)

Note: For 500 credit scores, rates are typically 8-12% or higher compared to prime borrowers.

3. Importance of This Calculation

Details: Understanding potential payments helps borrowers with poor credit evaluate FHA loan options, budgeting, and credit improvement strategies.

4. Using the Calculator

Tips: Enter loan amount, estimated interest rate (default 10.5% for 500 score), and loan term. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: Why are rates higher for 500 credit scores?
A: Lenders view poor credit as higher risk, requiring higher interest to offset potential defaults.

Q2: What loan types are available with 500 credit?
A: Primarily FHA loans (minimum 500 score) or subprime lenders, often requiring larger down payments.

Q3: How can I improve my mortgage terms?
A: Increase credit score to 580+ (better FHA terms) or 620+ (conventional loans), or save for larger down payment.

Q4: Does this include taxes and insurance?
A: No, this is principal and interest only. Add ~1-2% of home value annually for full PITI payment.

Q5: What's the maximum DTI for 500 scores?
A: Typically 43% debt-to-income ratio, sometimes lower with compensating factors.