 First Time Home Buyer Education Center
Icon Mortgage Lending is Mid-Michigan's most experienced First Time Home Buyer Team. This page is to help pass that experience and knowledge on to you and empower you to become the most savvy buyer that you can possibly be!
Repairing Your Credit
As you can imagine,
the first aspect of a mortgage application a loan officer is looking to assess is you credit. Especially in this foreclosure driven market, you can’t go half-hearted into a trying to apply for any type of mortgage. So in an effort to save both your time and mine, I would like to provide you with this guide to recognizing credit issues and resolving them before you apply for a mortgage.
1. Strength of Open Accounts:
The most common problem we face in getting people approved is the fact that they have no currently open credit. This means good open accounts: auto loans, student loans, or credit cards. An old collection from Sprint, will not get it done.
2. Payment history:
If you have made more than 3 payments more than 30 days late in the last twelve month, undoubtedly you will have a very hard time qualifying for a mortgage. Focus on establishing at least a 12 month history of making timely payments before you think about getting a mortgage. To your lender, if you haven’t paid Citibank $40 a month, why would you pay them $800 a month. So buckle down, do what you have to do, and get at least 12 months of clean credit references.
3. Inquiries.
So what if you are close but can’t seem to get approved? If you are within a few points of being able to get a loan, you may need to just wait a month until some of the inquiries on your credit cease to affect you so heavily. When you apply for a loan, someone pulls your credit. If you are young and trying to obtain credit over a few months, then you have had several people pull your credit, probably multiple times for each time you actually applied for credit. This is the type of thing that can take a 620 FICO (easily qualified) to a 599 FICO (extremely hard to qualify.
See, all these applications for credit look to a bank as if you are fervently looking to overextend yourself. You are a much bigger risk if you are obtaining a lot of credit very quickly. Whether you are obtaining it or not, applying shows this to the credit bureaus and you will be hurt because of it. However, if you wait a month or two to calm this effect you should be fine.
4. FICO Score:
If you happen to know your credit score, use this as a guide on whether or not you will be able to obtain a mortgage:
Below 600:
Unfortunately you will not be able to get a mortgage with a score this low. Focus on using the help above before you apply and take yet another hit to your credit by having it checked when you know it is too low.
600-619:
In a refinance situation you may be able to obtain financing in this range, though you will be best served by taking the time to get your score up. If you are trying to purchase, you will need to get to the next level before you can qualify.
620-680:
If you are refinancing, you should be fine if you would like to lower your rate but if you need to refinance to take any cash from your equity, you will need to focus on the advice above to raise your score first. If you are purchasing you will be fine as long as you are using some type of government-back financing. If you are in the rare situation that requires Conventional Financing (property location, income limits) then plan on having at least a 10% down payment.
680-720:
This is a score range that used to be unquestionable, but times are a’changin’ my friend. Mostly you should be able to do what you want, however if you are looking to cash out on some equity or buy a second home (which if you are, congratulation you are a part of the 1%) you will still run into some trouble.
720+:
If you can’t do it with this score, you can’t do it at all.
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or Local: 810-953-4266
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Icon Mortgage Lending
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The Icon Mortgage Lending Team is comprised ONLY of Nationally Certified Mortgage Loan Originators approved through the NMLS Nationwide Mortgage Licensing System
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