Fixing Credit To Qualify For Home Loan

Tips In Fixing Credit To Qualify For Home Loan

It is highly recommended for home buyers or homeowners thinking of refinancing in checking their credit and credit reports for any errors they may have on their credit reports and see if they can maximize their credit scores so they can qualify for a mortgage loan and if they do qualify for a home loan, have the best credit scores possible to get the best mortgage rates. Mortgage rates are determined by the mortgage loan borrower’s credit scores and the higher the borrower’s credit scores are, the lower the mortgage rates the borrower will have.

Quick Tips In Improving Your Credit Scores

There are some quick tips where you can boost your credit scores. If you have maxed out credit cards, the chances are that you will have lower credit scores. Paying down your credit card balances will definitely boost your credit scores. The higher your available credit balance is, the more positive impact it will have on your credit scores. Having no active credit trade lines will have a negative impact on your credit scores. If you have no active credit trade lines, you should get three to five secured credit cards with at least $500 credit limits. Each one of those secured credit cards should boost your credit scores by 10 to 20 FICO points and as those secured credit cards ages, it will have more of a positive impact on your overall credit profile. As your secured credit card ages and you develop a perfect payment history with the secured credit card company, the secured credit card company will eventually get you a credit limit increase without having to put any more additional deposit. Once you have a timely payment history with your secured credit cards and your credit scores are at least 700 FICO, you will be able to qualify for traditional unsecured credit cards. Do not apply for unsecured credit cards if your credit scores are below 700 FICO.

Credit Repair Prior To Applying For Mortgage

If you are planning in enrolling in a credit repair program, make sure you do it well in advance of applying for a mortgage loan. The main reason is because credit repair involves disputing negative credit items to the three credit reporting agencies and there are strict mortgage lending guidelines when it comes with credit disputes during mortgage process . You cannot have any credit disputes on non-medical collection accounts with credit balances that totals $1,000 or more ( total of unpaid collection accounts ) to qualify for a FHA Loan. You need to get the credit disputes retracted in order for the mortgage process to proceed. You can qualify for FHA Loans with unpaid collection balances and charge offs. Charge off accounts and medical collection accounts are totally exempt and do not count under FHA federal mortgage lending guidelines. However, if you have more than $2,000 of unpaid collection account balances of $2,000 or more on non-medical collection accounts, then 5% of the unpaid collection balance will be used to calculate the mortgage loan borrower’s debt to income ratios. Cases where the mortgage loan borrower has a large collection account balance like $10,000, then 5% of the $10,000 unpaid collection balance or $500 will be used as the mortgage loan borrower’s monthly debt and will be used to calculate their debt to income ratios even though they do not have to pay the $500 per month. For those mortgage loan applicants with large collection account balances and prior bad credit, it is highly recommended that they start a credit repair program to see if they can have their collection accounts and negative credit items deleted off their credit report. However, credit repair does take time and home buyers should start credit repair program well ahead of time of them actually applying for a mortgage.