Mortgage Loan Options For Home Buyers Bad Credit
In this blog, we will cover the mortgage loan options for home buyers bad credit. Many First Time Home Buyers do not realize the simplicity of qualifying for a mortgage and becoming homeowners. Many first time home buyers are under the impression that they need 20% down payment on home purchase and need perfect credit. This is not the case. Having good credit and high credit scores does make qualifying and getting approved for a mortgage easier. The higher the credit scores, the lower the mortgage rates. It is best to prepare and try to maximize your credit scores before applying for a mortgage loan.
Mortgage borrowers can qualify for a mortgage with credit scores down to 500 FICO. You can have outstanding collections and charge-offs and qualify and get approved for a home loan. They key to getting an approve/eligible per automated underwriting system is to have been timely on all of y9ur monthly debt payments in the past 12 months. Gustan Cho Associates has helped countless of renters become homeowners. We are experts in helping first time home buyers bad credit. In this article, we will discuss and cover the mortgage loan options for home buyers bad credit.
FAQ By First Time Home Buyers Bad Credit
We will be cover frequently asked questions in this blog for first time home buyers bad credit. What is the best mortgage loan options for first-time home buyers bad credit. What type of loan program can home buyers bad credit get approved for? Buying first home is not as difficult as it seems. How about first time home buyers bad credit?
How difficult is it for first time home buyers bad credit qualify for mortgage? What is the minimum credit score required to qualify for home loan for first time home buyers bad credit? Do collections and charged off accounts need to be paid off? What down payment is needed? Are rates higher for first time home buyers bad credit mortgage?
Reasons Why Renters Are Afraid To Qualify For Mortgage
There are many advantages of being a homeowner versus a renter. Home Buyers do not need perfect credit to qualify for mortgage. Buyers do not need a lot of money to become homeowners. Borrowers do need qualified income. Qualified Income is a full time job or income from other income sources such as social security income, pension income, or other income sources.
First Time Home Buyers Bad Credit have come to the right website. We offer multiple online advice for first time home buyers. We can help and guide home buyers who have had prior bad credit, prior bankruptcy, prior foreclosure, prior deed in lieu of foreclosure, as well as prior short sale. The team at Gustan Cho Associatesc. are experts in helping borrowers with bad credit and credit scores down to 500 FICO.
Advice For First Time Home Buyers Bad Credit
Once a person has decided to become a first time home buyer, they should due their due diligence and go over personal finances and personal situation. There are certain questions they need to go over carefully. A home is a person’s single largest investment in their lifetime. Compare how much is current rent versus how much a new housing payment will be. Go over if a mortgage payment is affordable? What town or city are you planning to move to. How long is the homeowner planning on living in the area they select?
Is home buyer intending on moving out of the area after a year or so. It may not be a good idea to buy a home if the buyer is not intending in living in the area for at least three to five or more years. 3.5% minimum down payment is required on FHA loans for a home purchase with a minimum credit score of 500 FICO. The down payment can be gifted by family member. Homeowners comes with responsibility. The homeowners is responsible for repairs and maintenance on home. Reserves is highly recommended in the event if something goes wrong like a broken furnace, or broken appliances.
Down Payment and Closing Costs For Home Purchase
Down payment is required on home purchases. All real estate transactions comes with closing costs. FHA loan programs require a 3.5% minimum down payment. 5% down payment is required for conventional mortgage loan. Closing costs average around 2% to 5% of the home purchase price. However, most buyers can get a seller concession towards a buyer’s closing costs.
Most home buyers do not have to worry about closing costs. Buyers who cannot get a seller to agree to give sellers concession towards a buyers closing costs, then lender can cover most of the closing costs with lender’s credit in lieu of charging slightly higher rate. The down payment needs to be sourced. Borrowers who do not have the minimum down payment required can get the down payment from a family member and/or relative as a gift. The gift funds cannot be a loan and the donor needs to certify that the gift funds will not be paid back and is solely a gift.
Advantages of Being Homeowner Versus Renter
There are many advantages of being a homeowner versus a renter. You never have to worry about a landlord not renewing their lease on a home. Homeowners have security by owning their own home. Sometimes new mortgage on new home is the same or lower than current rental payments.
One of the major advantages of being a homeowner is building equity over the time. As a renter, the rent paid is a non recoverable expense. Mortgage interest, property taxes, and other housing expenses are often tax deductible. Homeowners are paying mortgage instead of paying rent to landlord so landlord gains equity.
Security As Homeowners
Homeowner can decorate home the way it suits them and their family without having to ask the landlord for permission. Many renters are not allowed to have pets. Homeowners can decide to adopt any cats, dogs, or other pets without permission from landlord. Homeowners can feel secure because landlord does not decide whether or not to renew lease.
What Do I Do Next Once I Decided To Be A Homeowner?
Once renters decided to become homeowners, the next step is to seek the advice of a mortgage lender. Lenders do not charge anything for qualifying and pre-approving borrowers. Loan officers will ask mortgage applicants to complete a four page mortgage application, also known as a 1003.
What Is The 1003 Mortgage Loan Application
The 1003 mortgage loan application is the official mortgage application the loan officer needs borrowers to complete to run credit and run the file through the automated underwriting system (AUS). Mortgage applicants need to state the following on the 1003:
- gross monthly income
- asset information such as the money in checking and saving account
- IRA’s
- 401k
- investment accounts
- employment information
- social security number
- date of birth
- two years residential history
- complete a questionnaire which asks about past and present financial situation
Analysis of Credit Scores and Credit Report By Mortgage Lenders
Loan originator will then run a tri-merger credit report. Will go over the credit report to see if there are any inaccuracies reported on credit report. Mortgage loan originator will then submit home loan application to Fannie Mae’s or Freddie Mac’s Automated Underwriting System for an automated approval.
With an automated approval per DU FINDINGS and/or LP FINDINGS, loan officer will crosscheck the loan officer’s company lender overlays. How a pre-approval is issued depends on the individual mortgage company. All pre-approvals issued by Gustan Cho Associates are full credit approvals fully underwritten and signed off by mortgage underwriters. Pre-Approved borrowers can then hire a realtor and start shopping for home and enter into a real estate purchase contract.
Can I Still Get A Mortgage Loan Approval For Home Buyers Bad Credit
The minimum credit score required for a 3.5% FHA insured mortgage loan is 500. Borrowers can still qualify for FHA loans with prior bad credit. Borrowers can still qualify for a mortgage even if they have unsatisfied open collection accounts without having to pay them off. I strongly recommend do not pay off old collection accounts. Because by doing so, consumers re-activate older collection account can drop credit score.
- Mortgages will typically have a 15-day grace period for late payments, though it’s a good idea to double-check with your lender so you know exactly how much late fees are. Once your payment is 30 days late — or you miss making it altogether — that’s the point where your credit score can be impacted.
Lenders do want to see borrowers have been timely with all of payments in the past 12 months. One or two recent late payments are not deal breakers. Good letter of explanation will be required. Habitual late payers will have a problem Worst case scenario, recent late payers might have to show six months of on time payment history. Overdrafts in the past 12 months are normally not allowed. One or two overdrafts will not be deal breakers. But habitual recent overdrafts can be a problem.
Home Buyers Bad Credit After Bankruptcy and Foreclosure
Borrowers can still qualify for mortgage loan after a bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale. However, most lenders will not qualify borrowers with late payments after bankruptcy and foreclosure. Late payments after bankruptcy and/or foreclosure is not a deal killer with lender with no overlays. Gustan Cho Associates has no overlays on FHA, VA, USDA, and Conventional loans. There is a mandatory waiting period of two years after the discharge date of Chapter 7 bankruptcy on FHA, VA, USDA loans.
Qualifying For Mortgage With Lender With No Overlays
Home Buyers bad credit who need to qualify for mortgage with a lender licensed in 48 states with over 210 wholesale lending partners with no overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We have zero overlays on FHA, VA, USDA, and Conventional loans.
Gustan Cho Associates are mortgage brokers with a national reputation for being able to do mortgage loans other lenders cannot do. Over 80% of our clients are borrowers who could not qualify at other mortgage companies due to lender overlays. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
