Do I need perfect credit to get a
Do I need perfect credit to get a mortgage? - No. Imagine if perfect
credit was required. Few loans would be made and every lender in town
would be bankrupt. You do not need perfect credit. However if you want
the "perfect" loan then perfect credit definitely helps. Discuss your
needs with a broker you trust.
You can obtain a mortgage loan with almost any
type of credit. However, the worse the credit the more you will be
required to put down as a down payment for a purchase transaction and
the higher the interest rate you are more likely to pay. Sometimes
compensating factors such as a lot of documented liquid assets, great
job time, and a very low DTI (Debt to Income Ratio ) may help to
slightly compensate for a lower credit score.
Perfect credit is not needed to get a mortgage
because most lenders do not judge borrowers on credit alone. Although,
credit is a big factor when applying for a mortgage each lender has
different criteria to be approved for a mortgage. Lenders also take
into account a borrower's mortgage/rental history, employment history,
and other factors. There are many lenders that target borrowers with
less than perfect credit which is called sub-prime lending.
Sub-Prime lenders specialize in people with less
than perfect credit. With the loan programs available in todays market
most people can purchase a home.
There are many different types of mortgages that
you will be able to get without perfect credit. Some programs use the
credit score only, only the mortgage history, and some will even
disregard collections and judgments allowing them to exist without
having to pay them off.
If you are thinking about buying a home but you
are not quite sure if you can qualify then it might make sense for you
to contact a mortgage broker. A good mortgage professional will not
only look at your credit but will also look at your complete financial
picture to see what makes sense for your current situation. They will
also make recommendations on what programs will be available for your
situation. If you are unable to obtain a mortage now a mortgage
prefessional will help guide you through what needs to be accomplished
so you can qualify real soon.
There are some lenders that do not even look at
FICO scores. This is because sometimes people have not established any
credit , but yet will still make rental payments and utility payments
on time. These various payment histories will appear on an individuals
There is no such thing as 'perfect credit' . All
consumers who have a credit rating fall into either 'conforming' or
'subprime' financing category. There are even programs for first time
borrowers who have no credit history.
However, some consumers who have had difficulty meeting their
commitments may have credit so damaged that they could be asked to
raise their credit score to qualify .
If you have poor credit ou should strive to
improve your credit rating after securing a mortgage. This will allow
you to refinance at a conforming rate and save you money every month.
When banks underwrite a mortgage application,
there are four major factors they consider. Credit history is only one
of four. Lenders also examine the loan applicant's ability to repay the
loan, the homeowner's asset reserves, and the loan amount in relation
to the property value, in other words, how much is the homeowner
putting up in the property. With one or more of the other three factors
being above average, even a homebuyer with below average credit profile
can easily obtain a mortgage.
Even if you have filed for bankruptcy or are
currently in foreclosure, contact us about refinancing your property.
You do not need perfect credit, even bad credit is OK with us because
we have thousands of loan programs for borrowers of all credit types.
Many mortgage loans programs are available to
borrowers with less than perfect credit. One thing to consider when
obtaining a loan with less than perfect credit: The borrower can
usually get a better interest rate by getting a 2 or 3 year fixed
product rather than the traditional 30 year fixed. This makes good
sense because once the credit is repaired 2 or 3 years down the road
the borrower will most likely want to refinance into a lower interest
"A" paper type loan.
Some other factors that lenders will look at is
the borrower's payment history on an existing mortgage as well as
rental history. The better the payment history, meaning no late
payments greater than 30 days, you will qualify for a lower interest
rate and higher loan amount.
Refinancing with Less Than Perfect Credit - Many
homeowners mistakenly believe that they cannot qualify for a refinance
or benefit from one because they have a less than perfect credit
history. The fact is I have hundreds of loan programs available for
borrowers who have had credit difficulties. A mortgage professional
such as myself can analyze your individual situation and advise you if
changes in your mortgage situation would benefit you.
Working with a broker means that you can often get
approved for loans that you might not be able to otherwise. Most
brokers work with as many as several hundred lenders, and have access
to the loan programs from all of those lenders. This means that they
can probably approve you for a loan, even with less than perfect credit.
Sometimes, all it takes is a little creative
thinking for a loan to work. A good broker knows that not all people
fit into a cookie cutter mold and that sometimes, you have to think
outside of the box.
Most local banks will not deal with consumers with
below average credit. This is one of many reasons that working with a
mortgage broker can help you. Mortgage brokers have programs for below
with excellent credit, less than perfect credit and downright bad
credit. Not only do they have loans for all different credit types but
they also have loans for all different income types. They can mix and
match these types of loans together too. An example is if you were a
self-employed individual and it was hard to document your income and
your credit was below average, a mortgage broker may find the loan that
suits you best is a sub-prime loan that will allow you to use bank
statements as income documentation instead of W2's, tax returns and
pay-stubs. Therefore, there are many choices available to consumers
with less than perfect credit.
If you have paid your mortgage on time for a
minimum of 1 year, you may qualify for an FHA refinance loan. An FHA
loan is a government insured loan. There are loan limits for FHA loans
so be sure to consult with your mortgage professional at 415-617-5448
or e-mail[email protected]
to see if you are eligible for FHA financing.
Believe it or not, there are even programs
available for people who have recently had a bankruptcy!
Use your new mortgage to build a better credit
score! It's not easy, but making every mortgage payments on time for
24-36 months can help build higher credit scores. For this reason, many
people will initially take a 2-year ARM or 3-year ARM, build a string
payment history (and higher scores), then refinance into a lower, fixed
rate mortgage. Managing credit properly requires persistence but allows
you to save thousands of dollars in the long run.
Does your credit report contain errors? If so it
could result in you over-paying on your next mortgage. Correcting
mistaken accounts can take time so the process should be started as
soon as you recognize the mistakes. Common mistakes are duplicate
accounts, old accounts that have not been updated, or accounts that are
marked "open" when in fact they have been paid and closed.
Purchasing a home with less than perfect credit -
It is possible to buy a home with credit that is not perfect. It is
even possible to buy a home with flawed credit or below average credit
and put little to no money down. Millions of homeowners have bought
homes while having credit that is somewhat flawed or below average.
Consult a mortgage broker to find out how much of a home you qualify
for, how much of a down payment may be needed and what types of home
loan programs are available with your exact credit scores.
Many people believe their credit score will be
worse than it actually is. Others believe they have good credit, but
their credit score is actually low. So, the first step is to have your
mortgage professional run a credit report on you and review it with
you. Then he can gather some information from you and present you with
some financing options based on your specific situation.
Obtaining a new mortgage is a great opportunity to
build a strong credit history and higher credit scores. After 2 or 3
years of on time payments marginal credit scores can really see an
increase. To take full advantage of this opportunity you must make
every payment on time and try not to acquire any new debt.
There are plenty of lenders around the country
that finance homes to people that have less than perfect credit.
Talking with a mortgage broker allows you have access to many different
loan programs. They will be able to find the lender that will fit your
credit and preferences.
Have you reviewed you credit report for errors?
Credit reports often times contain incorrect derogatory information
that may be negatively affecting your credit score. Ask your mortgage
broker or loan officer to review your credit report with you and be
sure to point out any incorrect data. The process of correcting credit
report errors can be tedious, but the results can save you hundreds of
dollars every month.
Lenders offer many different forms of alternative
financing for borrowers who have less than perfect credit. You should
never sell yourself short and think that your credit is too bad. Get in
contact with your local mortgage broker about the different options of
financing that are available. You will be surprised in what financing
options are available today.
Home buyers with less than perfect credit history
should expect to pay higher interests than others. Although many banks
are more than willing to grant loans to homebuyers with bad credits,
they charge higher interest rates to justify the higher risks with