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MAJESTIC HOME LOAN

Home Loans for Bad Credit



May 15, 2017

For those who have low credit scores, say someone with a score below 600, they may not have as many choices when researching mortgage loans. Most loans today ask for a credit score of at least 620 but there are programs that allow for an approval with a score as low as 580. FHA loans are a popular choice for those with less-than-perfect credit due to the flexibility FHA approvals offer. There still income and employment requirements and the lender must verify there are enough funds in the bank to cover the down payment and associated closing costs but those with bad credit don’t have to wait if they don’t want to. There are possible alternatives.

For someone with bad credit and it was the result of an isolated event or during a specific period of time, they do have options. Lenders can evaluate a credit report and determine if the borrowers did have something happen during a particular period of time if a series of late payments are showing up around the same time frame. If however there are late payments over an extended period without any external event that caused the late payments, that’s a different story. Lenders are in the business of making loans but they also want to be paid back on time.

Lenders adjust interest rates and loan approvals based upon credit scores. If someone wants to get a better rate or are told they need to get to a minimum score, there are two things borrowers can do that will have the greatest impact in the shortest period of time.

There are five categories that make up a three digit credit score. Those include the payment history, account balances, length of time using credit, types of credit used and credit inquiries. Of these five, payment history and account balances make up two-thirds of the entire score. Concentrating on these two will cause scores to rise more quickly.

Payment history refers to the absence of any payments listed on the credit report more than 30 days late. If there are such lates, scores will be damaged. If recent payments are listed as being more than 60 or 90 days late, scores will plummet. Borrowers must concentrate on making payments on time and at minimum no more payments made more than 30 days past the scheduled due date.

Available credit compares account balances with credit lines. The ideal balance-to-limit ratio is approximately one-third. If a credit card limit is $5,000, the ideal balance is round $1,500. Keeping balances in check and making payments on time will cause scores to rise within a matter of months and borrowers won’t have to take on a loan with higher rates.

For more information or questions about mortgage loans, please call  (855) 757-8748.

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