How Credit Works when getting a home loan

Trying to buy a house? here is what you need to know about credit

Everybody knows you need to have credit when you are looking for a house. The part that gets skimmed over or not really covered is how it works and what the lenders are actually looking for. Here is a quick breakdown to get you on the right track and take away any confusion you may have. After working with credit repair, and closing hundreds of home loans we can walk you through the process.

1. Segments of credit that determine your FICO score

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When a lender looks at your credit score they will weigh different factors. This chart shows which parts of credit carry the most impact. Paying your bills on time and not having credit cards maxed out will help you a lot. Sometimes even paying off one of your cards can dramatically raise your score. Speak with your mortgage loan originator before taking any steps for a review of your credit profile.

2. What score is needed for a home loan?

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The 100% Financing with the Sapphire program has a minimum score requirement of 620. For FHA financing with a 3.5% down payment the minimum score requirement is 600. Some programs allow a lower score, even down 550 although that is not recommended and should be decided on a case by case basis after a consultation.

3. Some key points to note

1. Medical collections DO NOT always need to be paid prior to getting a loan.
2. Some accounts in collections may disqualify you from getting the loan. Speak with your mortgage loan originator to find out which ones need to be paid off.
3. Student loans in deffered status must be taken into account. The law recently changed to include student loan debt in debt to income ratios.
4. Credit reports use 3 reporting agencies: Experian, Equifax, and Trans Union. Your middle score is the one that determines what your score is. Ie 625, 635, 680. The score used would be 635.
5. If you have pulled your own credit, you see a “Consumer education report.” When applying for a loan a “FICO ii, FICO Classic 4, and Beacon 5.0.” Because of the different models used the score may vary from what you were expecting.

4. Customization

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You don’t fit in a box, so why should your loan? As a mortgage loan originator we can design your loan around your situation. This gives us more flexibility to get you approved and funded in a fairly short amount of time.

That’s it to get you started!

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Whether you have just started the process of buying a home, or have been turned away by a big bank we may be able to offer some helpful advice to get you going in the right direction. If you would like to be contacted for a consultation just fill out the form to the left or just give us a call.
Richard Porter
916-996-8527
richard@wclteam.com
Broker NMLS#1092655

 

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