Do you have poor or weak credit but would like to purchase a home? You may have been told that it’s not possible. You may have applied for credit and was denied and now you are convinced that obtaining a mortgage loan is not possible. Well, it may be more possible than you think.. Of course your credit will need some attention. Kirkpatrick & Associates specializes in getting our clients lender-ready, but of course we will work with clients for most any purpose.
A lender qualifies a borrower based on a credit history and credit scores. There are three major credit reporting agencies; Experian, Equifax and TransUnion. You score ranges roughly between 500 and 850. Lenders most often receive FICO scores, which are not the same scores or based on the same scoring models as the scores a person purchases or receives from the credit reporting agencies. I recommend FICO.com to obtain the same scores that lenders get. There are three scoring models for FICO scores. Mortgage, revolving credit and auto loans. They provide all three scoring models.
EDUCATIONAL LOANS: Once educational loans are being paid current it is possible to qualify for a mortgage, even if delinquent payments are being reported from the past.
CREDIT CARDS: These payments need to be current and no late payments in the past 12 months. Some lenders will allow a letter from consumer, explaining late credit card payments. Credit cards balances need to be paid to below 19% of the credit limit. IE: $1,000 limit should have a balance of $190 or less. Paying credit cards down will improve credit scores.
BANKRUPTCY: A consumer can technically qualify for a mortgage two years after a bankruptcy. 3 years if the Bankruptcy included a foreclosure. Do keep in mind that credit has to be rebuilt during this time period.
LIENS AND JUDGMENTS: These must be paid and showing satisfied with all credit reporting agencies that are reporting these on your credit reports. Just because they are paid doesn’t mean they are reporting paid. If this is an issue, this is a service that we can assist you with. Call us at 205-352-3448
CHARGE-OFFS: These may or may not need to be paid to qualify for a mortgage. If there is one charge-off and otherwise good credit, then you may not have to pay. If the charge-off is old and under a certain dollar amount, it may not have to be satisfied to qualify. Worse case situation, you can contact the original or 3rd party debt collector and work out a settlement. They may not remove it from your credit report, but it will show that it was paid, and thus helping you to qualify for a loan. This can be a confusing process and we recommend that you call us when handling these situations.
MEDICAL COLLECTIONS; Many times all medical collections do not need to be paid to qualify. We at Kirkpatrick & Associates can help with this. We specialize in helping with 3rd party collections. If you are receiving too many or unwanted phone calls, we can stop the collectors from calling.
RENTAL HISTORY: Yes, a potential borrow can use rental history for credit when applying for a home loan, even when it’s not reflecting on your credit reports. Be sure and pay rental payments on time. Mortgage underwriters will require your rental history.
SELF-EMPLOYED OR 1099: You will need two years work history. Check with your lender for their guidelines. These can vary between lenders.
Do keep in mind that after taking care of all of these areas on your credit, you must have good accounts reporting on all of your credit reports. You credit score must be at least 580 for some lenders and 620 for others and 640 for most any lender. If you score is between 580 and 639 be prepared to have a larger down payment. A down payment is usually 3 to 3-1/2%. A lower credit score would require a much higher percentage for down payment. Please note: Do not depend on the scores from Credit Karma or any other 3rd party credit score service that does not specifically provide FICO scores.
We, at ReScore Solutions eat, think and obsess over credit related stuff. We would love to help you through the credit maze. It can be confusing and intimidating when trying to deal with credit related matters and paying collections. We view your credit reports for any violations of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. While you are spending time with your family we are working hard for you.