Learn What The Minimum Credit Score Is For Home Mortgage Loans
Part of what you now hear being billed as the global financial crisis is due to subprime
lenders who basically wrote mortgages for any type of buyer, regardless of their credit history and available income. That practice has led to many homeowners being forced out of their homes due to foreclosure, and many borrowers have terrible credit scores as a result. The days of one hundred percent financing are for the most part over, and borrowers must now have not only a down payment, but adequate income to meet the monthly payments.
So what is the rock bottom score that a borrower can have and still be approved for financing their new home? Lenders usually will not consider financing a mortgage loan for a buyer whose credit score is below 650. Although there are special financing programs available for those with less than stellar credit scores, if yours is below the 650 threshold, you will pay a ton of interest on your home mortgage, and you will have to dig really hard to find a lender with special financing who will accept you.
Improving Your Credit Score
What you should do to improve your homeownership potential is fix your credit. When you look at the situation from the point of view of the lender, a derogatory past credit performance is indicative of how you will perform with a new loan. By clearing up much of what the lender sees on your credit report, and adding new, positive items, you will stand a better chance of approval and reduce the interest that you will be charged - saving you thousands over the life of the loan.
Check Your Credit Report With The Big 3
Begin by checking your credit report with all three major credit reporting bureaus - Experian, Equifax, and Trans Union. It is imperative to check each bureau to determine if there are any mistaken or erroneous information on your report. When you find a mistake, dispute it immediately with the bureau holding the report.
The bureau will have thirty days to investigate the matter to determine the legitimacy of the item, and if they cannot prove the origin of the account, the item will have to be deleted. Many individuals find mistakes on one report and not the other, so check for items such as amounts of high credit, late payments, etc., to make sure they add up to what you have in your personal records.
Cleaning Up Your Credit Reputation
If you have past due account, avoid collection or get them out of collection before trying to get mortgage loan. Many collection agencies would prefer to remove an item and let you repay them than to lose out completely on the money you owe them.
Open up a couple of secured credit card accounts, which are backed up by a deposit that you make in the amount of credit you want to have. Make diligent payments each month that reflect paying off the entire balance except for thirty percent of the available credit. Lenders want to see that you can manage credit, so leaving a balance will help prove that.
Go with a lender who does business online. Online lenders offer reduced interest rates due to the number of lenders who are now doing business on the Internet.
by: Lara Sawyer
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