Category Archives: Mortgage Rates

Houses and Credit History

Can I get a Mortgage with a Low Credit Score?

As a general rule, yes you can. However, you will have to shop around for a lender. You will not be given the best rates. And, the terms and conditions will be a bit lopsided.  Below are a few things you want to consider to increase your chances of getting approval for a mortgage with a low credit score.

What is a Low Credit Score When It Comes to Home Loans

Houses and Credit HistoryThe 2012 National median credit score is 692. However, based on statistical data, most home loan providers require a consumer to have a higher score. The 2012 home loan average credit score (for approval) is around 734. Take note, this is only the average score, not an excellent one. Suffice it to say any score below 734 is low. However, you do not want to be so low as to go below the “all around” national median credit score of 692. In other words, when it comes to a home loan any score below 692 is not low, but bad.

The Down Payment

The higher your down payment the higher your chances go getting mortgage approval. The usual minimum down payment is 10%. For you to substantially increase your chances, anywhere between 25 to 50% or higher is your goal. This works two ways. Number one, this serves as “show money” and no lender will ignore a substantial cash amount, direct from the buyer. Second, this works to lower your total loanable amount. The lower the loanable amount the higher the chances of getting loan approval on a mortgage with a low credit score.

Mortgaged Property

A mortgage is an arrangement that attaches to a loan. This means that the property bought becomes a security for the fulfillment of the terms of the contract. Otherwise the same will be sold or applied to the debt. A mortgage on a property with a stable and high resale value within a good neighborhood and near basic necessities will be an easier deal than an out of nowhere location. Remember, the lender thinks ahead and in the worst case scenario. The same will not mind you defaulting and them acquiring on foreclosure, a highly marketable property. But they will not be too accommodating to grant a mortgage with a low credit score, if the property is not easily marketable.

Amount and Source of Income

Lenders will want positive data on the consumer to offset the negative or low credit score. Consumers with permanent jobs that pay well are preferred. At the very least they want to see a net income to loan amount of ratio f 30% max. This means that the amortization payments will not go beyond 30% of the net disposable income of the consumer.

What’s on Your Report?

In some cases it is not the score that is important, but the information found therein. Some lenders will assess a consumer based on the score and then based on specific reported information. For example, a low credit score because of dozens of credit card debts that are paid after it is due, but paid nonetheless is not as bad as a charge off or a previous bankruptcy filing, or a judgment involving fraud.

Houses and Credit History

How Can I Lower My Monthly Mortgage?

A mortgage is a financial arrangement that usually attaches to a credit transaction, in most cases a loan. The same is utilized as a security arrangement to add more incentive to the borrower to make monthly mortgage payments on time and in full. The usual agreement involves a borrower promising to pay the principal and interest for a fixed number of times in specific intervals. Repeated defaults will result in the creditor charging additional interests, penalties AND the ability to take a promised property known as the security or collateral. The property is then applied as payment to the debt or sold and the proceeds applied to the debt.

Goal

Because of the economic downturn, most consumers are now asking how they can lower their monthly mortgage payments. This article will discuss just that. The discussion will differentiate between an existing mortgage and a mortgage soon to be applied for.

Credit Score

Any application for a loan or renegotiation of the same needs the best credit report and score that the consumer can muster. As such the same consumer must undertake credit repair a few months before loan take out or loan renegotiation. Credit repair can be subdivided into three phases:

  • Houses and Credit HistoryEmergency repair: This can up a few points (1 to 2 digits) in a matter of 3 days to 1 week.
  • Midterm repair: This takes 30 to 90 days. This involves disputing ruinous information that is false, inaccurate or obsolete.
  • Long Term: This takes 1 to 10 years. It involves sound financial planning, and waiting for long term information to be removed (i.e. charge off, bankruptcy, judgements, etc).

Starting Point

Only start negotiating or renegotiating after credit repair efforts have already paid off. You verify the same by pulling out new reports and comparing it to your older reports. Your goal is to have excellent credit scores or very near the same.

Mortgage as a Fact

If you already have an existing mortgage then you have to know exactly what the terms are. Make sure you understand the type of interest, interest rate, number of installments, any prepayment penalty, etc. You start with your current lender. Ask for a loan modification or refinance. Your goal is to lower the TOTAL of the monthly mortgage payments made.

The operative word is “Total”. This usually means converting ARM loans to fixed rate mortgages or getting a lower interest payment with the same number of payments.

Mortgage Before the Fact

If you are still shopping around for a loan and have finished with credit repair, it is now time to ask for pre-approval. Remember, ARM rates may be tempting, but take a second look at the same. Make sure that you are not just looking at the initial fixed rate, but at the expected and repeated rise of mortgage interest rates once the adjustable rate begins.

When you request for pre-approval, make sure that you know the average rates your credit score and particular loan application yields. You then compare the offers of different banks and lender, often times pitting one against the other. Tip: Ask for a written offer, and then let a competing lender peek at the same.