So really, what you need is a good mortgage program that allows bad credit, not a bad credit mortgage program.
DId you know that recent changes made by major mortgage lending institutions have made qualifying for a mortgage with bad credit easier than it has been in years?
Acceptable credit scores are now lower and the “waiting periods” or time since major credit events like a bankruptcy, foreclosure or short sale have been reduced.
Are there good mortgage programs that allow bad credit? Yes. With the recent changes, we have plenty of home loan programs now allowing below average credit.
Along with your employment history, savings history, qualifying income and property value, your credit history is one of the most important qualifying factors that all lenders consider.
Once you have determined that you need a new mortgage to purchase a home, refinance for a lower interest rate/payment or consolidate debts, this simple 3 step guide will help you understand what to expect and how to proceed.
Let’s take a look at a logical, 3 step approach that we have used with thousands of new home buyers and homeowners over the last 20 years.
The 3 steps are 1) review your current credit, 2) understand lender requirements and 3) establish a plan to get approved.
Step 1 – Review Your Current Credit
The best way to do this is to order your free credit report from Experian, Equifax and Transunion. These are the three major credit repositories that lenders rely on to make credit based decisions.
Also, By law, they must provide you with a free copy of your report every 12 months upon request. These three companies jointly own and operate this site to facilitate these consumer requests.
If you visit annual credit report.com, you can order your free copy. The free copy does not include your
credit score. To get the report with a credit score, you will need to pay for this. It should be about $8.00 for each score.
Better yet, enlist the help of an experienced loan officer first, before spending money on credit repair companies, some of which charge thousands of dollars.
As long as it’s a recent report, we can offer you free advice about what you can qualify for now and what steps to take to improve your credit rating and scores.
Your credit rating and score will reflect the combination of all accounts listed, good and bad along with other factors such as length of time credit has been established, relationship of good trade lines (accounts) to derogatory trade lines, number of accounts with open balances, recent late payment or non-payment items and credit inquires.
Step 2 – Understand Lender Requirements
Because all lenders will have specific credit requirements, you will need to consider the following:
- Your middle credit score – major bank will generally require higher scores of at least 680 or even higher while our programs allow scores down to to 560 (500 in some cases).
- Late payments – recent lates payments on all consumer accounts including mortgage loans, auto loans, credit cards , etc. will be considered.
- Collections, judgements and liens – the most concern will here will be of the newer (less than) 2 years old accounts.
- Bankruptcy, foreclosures and short sales – these items will need to be seasoned as well, meaning a certain amount of time must have passed (usually 2 years) to be acceptable.
Step 3 – Establish a Plan to Get Approved
My experience has shown that most home buyers and home owners have a plan of where they would like be financially, they are just not sure of how to get there.
So, what is your plan for the next 10, 20 or 30 years? If it involves home ownership, then its best to incorporate your home loan into it. Often your home loan is the cornerstone of your long term financial plan.
If you are planning to consolidate debts, make home improvements, save for college educations, retirement or just pay off your home, having the right mortgage will help you accomplish this.
In conclusion, don’t let your previous credit issues stop you from qualifying for a mortgage.
Whether your credit is good enough now to get a good home loan or not, with some guidance and a little work, your future credit report will look much better and things will improve.
Remember, you need a good mortgage program that will allow bad credit not a bad credit mortgage program.
Millions of people have experienced credit problems so don’t be shy, ask for our advice. We are always happy to help.
Are you ready to see what is possible? Call us at 800-607-1941.
Posted by: Brian Bush
Brian and his team have been funding Real Estate Loans for over 25 years.
Since 1991, they have funded over 1.5 Billion Dollars in loans.
You can reach Brian at 800-607-1941 x220 or email@example.com