Poor Credit and Bad Credit Home Loans
So the title of this story makes it pretty clear what we’re diving into today. Bad credit home loans or home loans for poor credit. As Americans we should all have a better understanding of where we are in our quest for the American Dream. Whether you’ve already owned a home for years or you’re getting ready to buy your first, this will hopefully help ease your fears (and relieve some stress) about the whole process.
It’s no secret that your credit score and credit profile is a massive hurdle in purchasing a home. The days of sub-prime lending and essentially robbing new home buyers are long gone. People now cringe at the thought of a home loan application and even more so when they know their credit isn’t up-to-par. Things have certainly tightened up when it comes to having bad credit and getting a home loan. Here’s the good news….it’s still VERY possible to buy a home with less than perfect credit. The minimum FHA credit score requirement has now dropped 60 points. Here’s a few helpful tips to prepare you for that very possible journey.
Poor Credit Home Loan Tips
Helpful tip #1:
Don’t be obsessed with your FICO score. Sure the score has to be at a minimum level but nowadays a lot of it has to do with the overall credit profile. The home loan application is full of questions that make up the credit profile. Things like recent late payments, recent credit inquiries and high balances on credit cards are all little things that add up to never getting that mortgage with your poor credit. It’s all about paying attention to the details. A lot of people have small things on their credit that are having a huge negative impact. Maybe a $75 medical bill or a $120 old cable bill. You’d be surprised how much that could help your credit just by paying those little things off.
Helpful tip #2:
Do not have any late payments in the last 12 months. Late payments are never a good thing but let’s face it….at some point we all go through our hardships in life. Having late payments on your credit won’t deny your home loan but having late payments within the last 12 months will almost sure reject your home loan application.
Helpful tip #3:
Don’t get “finance” happy. This one is really a 2 in 1 tip. Obviously when you finance or refinance something you have to have your credit pulled. So right there you’re adding an inquiry to your report. Too many of those and it starts to have a big negative impact. The bigger problem of financing purchases is you’re adding more debt to your credit profile. When purchasing a home they look at your debt to income ratio. Simply put it’s the amount of monthly obligations compared to your monthly income. The more debt the less likely a lender will approve your loan application.
A lot of these tips are redundant to a lot of you but it’s important to refresh our memories as well as educate the younger new home buyers. While home loans for bad credit are somewhat of a contradiction, with a little planning and education you can still achieve the American Dream. Please take a moment to read our article on how to get credit scores for the best mortgage rates.
If you’re ready to find out if you’re eligible for a home loan you can click on the green button at the top of this page.