Getting A Mortgage Despite Bad Credit 5 Things To Know Your Low Credit Score Doesnt Have To Waylay Y

Getting A Mortgage Despite Bad Credit 5 Things To Know Your Low Credit Score Doesnt Have To Waylay Y

If buying a new home is one of your New Year’s resolutions, you’re probably already making a to-do list and checking it twice. Item No. 1? Check your credit report. 

In addition to factors like your income, expenses and debt, lenders consider your credit history to gauge the likelihood that you will repay borrowed money. 

The good news? Fannie Mae's 2017 Mortgage Lender Sentiment Survey reports that lenders have eased, rather than tightened, home mortgage credit standards.

The bad news is that might not be enough to get you into a new home if your credit is less than perfect. 

But fret not – your not-so-sparkling score doesn’t have to mean a life sentence of renting. Here are five things to help you move from renter status to homeowner:

Monitor your credit regularly 

These days, self-imposed credit challenges are only part of the picture. With fraud and large-scale institutional data breaches on the rise, there are more reasons than ever to be vigilant in monitoring changes to your credit rating. 

The myth that checking your own credit report can affect your rating is just that: a myth. Only a “hard inquiry” that occurs when you apply for credit can affect your score. 

Make sure your credit reports are accurate

You don’t want to miss out on a loan because something is wrong in your credit report! If you check your credit report and find an error, contact the credit agency to submit a dispute and ask them to fix the problem. Remember, a lender will pull from three major credit agencies in the mortgage process: Equifax, Experian, and TransUnion. You are entitled to one free credit report each year from each of them. But be careful where you go online to get your free reports; the once-a-year free report is available only at www.annualcreditreport.com. 

Clean up your credit

Now is the time to work hard to raise your credit score. Simple ways to do so include paying your bills on time and keeping your debt to a minimum. Be patient. This takes time, and while your payment history for the past six to 12 months might be excellent, your credit score could still be lackluster. If your recent credit activity demonstrates a pattern of responsibility, it is possible to get a mortgage with weak credit.  

Know your loan options

If you’re already doing credit cleanup and you’re ready to move now, there are several loan options available:

Conventional

If your credit score is 620 or higher, you may qualify for a conventional home loan with as little as 3.5% down. 

For those with a small down payment, an FHA loan may be more cost effective.

FHA

If your score is less than 620, check out loans insured by Federal Housing Administration (FHA). The minimum credit score for an FHA home loan is: 500 with a 10% down payment and 580 with a 3.5 down payment.

Please keep in mind that lenders may impose higher minimum scores.

VA home loans 

These loans are available to American veterans, military members currently serving in the U.S. military, reservists and select surviving spouses. Most lenders will require a credit score of 620.

Timing 

If you’ve tried everything you can and your credit history is still not up to snuff, you may want to delay your homeownership dreams. By taking the time to improve your credit score, you’ll be able to secure a more affordable mortgage.  And by giving yourself more time to save money, you can weigh the pros of putting down that larger down payment or using the funds to pay down debt and clean up your credit. 

Author: Sandra De La Rosa
Phone: 480-375-0016
Dated: January 4th 2018
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