Getting A Home With Bad Credit
You're reading Getting A Home With Bad Credit, posted on Saturday, June 16th, 2007 at 11:11 am in Mortgage Loans, on BrainBloggers at the Get The Loan You Need blog. More after the jump.
When obtaining a home personal credit plays a very important role. We all cringe at the thought that our youthful past could keep us from getting our dream home in the future.But don’t be too worried because sometimes even the people with bad credit can get the home they want. There are many lenders out there who work specifically with these applicants with bad credit.
Mortgage lenders use credit reports to determine the amount of the mortgage loan and mortgage rate, as well as other mortgage conditions and terms that they will offer the homebuyer. Usually, the better the credit, the better the terms mortgage lenders would be able to offer. Mortgage refinancing options are also dependent on the homebuyer’s credit reports. There are three major credit reporting agencies: Experian, Equifax, and Trans Union. Homebuyers may obtain one free credit report from each of these agencies every 12 months. Mortgage lenders typically look at a merged report from all three agencies.
The credit reports list the homebuyer’s history of accounts including credit card, student loans, and real estate loans. They also list auto financing plans, child support, charge offs, and other financial accounts. The reports supply information on each account, such as when the account was opened, what the current balance is, what the highest balance was, and when each past-due payment was made.
If the account was closed, the reports will give the date it was closed and supply a reason if necessary. The reports also contain public records such as bankruptcy and foreclosure. Bankruptcy information stays on the records for 10 years. Account information stays on the records for seven years after the account is paid off. The information in these reports is not completely current – it is one to three months behind the date the reports are created.
Based on this information, the potential homebuyer is assigned a credit score ranging from 300 to 850. This credit score is often known as a FICO score, named after the Fair Isaac Company that came up with this method. A lot of factors can affect the score. Late payments on the accounts and unpaid debts lead to a record of bad credit and lower the credit score.
A credit score of 720 or above is likely to yield the best interest rates. Typically, the minimum score for mortgage lenders to approve a 30-year fixed-rate mortgage with a reasonable interest rate is 620. Potential homebuyers with bad credit will probably have scores lower than this. These homebuyers can try to repair their credit and increase their credit score. To repair credit, experts recommend that homebuyers submit all payments on time and pay off all overdue debt.
The process to recovery is a long one, but it is worth going through in order for homebuyers to obtain a good home mortgage loan. For homeowners who cannot wait out the long process of credit repair, getting a mortgage loan from a lender that deals with bad credit mortgages could be a good option.