Tag: credit

There are some that are able to pay cash for a new home with savings or inheritance.

For the most of us, however, we need a mortgage to buy a home. The qualification process isn’t that intuitive (work with a reputable mortgage lender for that type of help) and qualification requires adequate income and a solid credit profile.

A few investors will approve borrowers with sub par credit, but there’s a limit to low they’re willing to go.

If you’ve been turned down for a mortgage due to credit problems, here’s some good news: You can make your credit better, and faster than you might think!

I’m linking here to an article from NerdWallet – and I highly recommend that you take a look!

The author spoke to three consumers who had credit problems, did their research and made their calls – and then were able to successfully buy homes.  Here’s one of those success stories….

Credit Report Cleanup

At the beginning of the year, this potential borrower’s credit score was 535 and had more than $20,000 of debt. On top of that, he had multiple 3 of his accounts were delinquent accounts. The consumer had to stop the collectors and find a way out of debt.

First Step – CHECKING CREDIT

First off, the consumer made a plan. He visited annualcreditreport.com and collected his credit reports from all three bureaus. He then outlined each debt, the date each account went delinquent and the date the last payment had been made, his account numbers, the collection notices and any other pertinent details.

Second Step – VERIFYING DEBTS

Unfortunately, the cutomer hadn’t kept great records, but he saw some debts on his credit report that he didn’t recognize. So he took action.

“Next, I challenged every single item, ensuring that each collector could verify the debt and had the proper paperwork to validate their collection efforts,” he says. “This resulted in four or five items being dropped.”

Third Step – NEGOTIATING BALANCES

His next step was to reduce each verified debt. “I went bottom-up, calling each debt collector starting with the lowest value, making offers by telling them exactly how much I could budget as an offer to settle,” he says. He also asked each if it would remove the delinquent account from his credit report entirely. He says it’s not common for creditors to do this, but some did.

“Across the board, I settled for less than half of what I owed in every case,” he says.

Fourth Step – TRANSFORMING CREDIT

Last, the consumer began restoring his credit. He was taking college courses on a tuition reimbursement program, but he applied for a student loan anyway.

This helped him establish enough credit to qualify for a basic credit card.

He also began monitoring his score monthly and stuck to smart financial habits, such as paying his bills on time. About a year later, his credit score hit 640 — the minimum required for him to get an FHA loan at the time.

Just 26 months after beginning his efforts, his credit score skyrocketed from 535 to 733. Nowadays, it hovers around 800.

His words….“Through disputing, negotiatingg, settling and rebuilding, I was able to go from needing a large deposit for an apartment to buying a home of my own,”

“As rent continues to rise, this investment has paid off several times over, and I have built equity in the house itself. I couldn’t have done this without learning how to [restore] my credit.”

Conclusion

This borrower’s story can be of great hope to those who are intent on home ownership. As you can see, it took time and effort, but it really paid off for this particular buyer.

It would be my pleasure to help you through this process in and into a new home, as well!

Photo Credit: Cafe Credit via Flickr, under the Creative Commons License

There are several ways to improve an ugly credit score, and some work fairly quickly. The methods you use depend on the reasons behind the FICO score itself.

Source: Solve These 3 Problems And Improve Your Credit Score Fast | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

One of the biggest concerns of buyers entering into the purchase of a home, is whether their credit score will have a negative effect on their ability to secure a good loan. Ugly credit scores can feel debilitating.

It is important for realtors and loan originators to know how to coach buyers through methods that will improve their score in a relatively short period, enabling them to move forward in their new home purchase.

Low FICO score? Is it because they don’t have much credit?

In some cases, one of the reasons buyers don’t have a high FICO score is that they simply don’t have much of a history. This is a completely different scenario from having a bad history! Lenders are able to pull both non-traditional and manual credit reports to check things like utility payments, rent-to-own agreements, leases and personal loans to provide evidence of good financial management. A low credit score does not need to be a deterrent if your buyer has been financially responsible.

If your buyer needs some quick fixes to a limited credit history, consider advising them to do the following:

• Use a newly acquired credit card for small purchases and pay it off on time, in full, every month.
• Piggy back on a relative’s good credit by becoming an authorized user of their credit card and get their card added to your history. (Hint: You do not have to actually use the card to get this benefit!)

Re-establishing Credit

Time is a healer of many things, but for the purpose of this report, it is a healer of bad credit. If your buyer has some baggage in their credit history (missed payments, bankruptcies, repossession), keep them focused on the most recent infractions. What has happened in the last 12 calendar months is the most important and can actually be used to compensate for mistakes made in years past. For example, the FHA is happy when buyers can show a 12-month on time payment history.

Likewise, using credit too often is a red flag, especially when the spending exceeds the ability to pay. Buyers should be careful in the months before applying for a loan, not to use too much of their available credit. Debt management plans may need to be put in place in the early stages of looking for a home so that when it comes time to lock a loan, your buyer can get the best deal for them.

If those of us in the business of helping buyers to find the home of their dreams, can offer some of these tips, the home buying experience will continue to improve.

Feel free to call, text, or email anytime, as it would be my pleasure to help!