05-17-2003, 07:38 PM
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Confirmed User
Join Date: Feb 2002
Location: Free Speech Land
Posts: 9,484
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Quote:
Originally posted by nevermind
I know something about this so maybe this information will be helpful:
There are THREE things lenders consider when granting a home loan. Credit is only ONE of them, but it is not the end all be all of getting a mortage.
Lenders generally consider the following:
1) Credit
2) Employment
3) Cash
If you meet the criteria for at least two out of the three items listed above --- you're generally in pretty good shape. If you only meet one of the criteria, you still can get a mortgage. But all of the circumstances change depending upon your situation.
Let's start with a typical conventional loan.
1) Credit --- The lenders generally want a credit score of 620, and no late payments or collections for the past two years. Even if you've had a bankruptcy or foreclosure, as long as you've been clean in the last two years and have that 620 score or better -- you're credit is generally considered ok.
2) Employment --- They usually look for two years steady employment with W-2's to prove your income. If you're self employed, tax returns will do the same.
3) Money --- Let's say your credit is screwed up, but you still have a good job with steady income. Or, you're credit is great, but you just lost your job and have no steady income. If you have the cash to make a 20 percent down payment --- which substantially reduces the bank's risk --- you can still get a conventional mortgage.
BUT --- If you also have a lot of existing debt, that can screw up your application --- especially if you're out of a job. And, even if you do have a steady job, you have to make sure that your debt payments aren't so high that your NET income isn't enough to cover living expenses and, of course, the mortgage and property taxes.
Now, assuming the you don't have any major existing debt payments ... but you've got other problems and only meet ONE of the criteria mentioned above ...
You can still get a decent mortgage, but usually with a government guaranteed loan program -- typically FHA. However, you still would have to cough up some cash --- usually a three percent down payment plus closing costs which, give or take on the home price, fees, etc., could add another $5,000 to the bill. (The costs are much less if you served in the military and qualify for VA no money down loan, but that's another story.)
Then, if all else fails, you can do what is called an 80/20 loan for high risk borrowers. Basically 80 percent of the loan is financed at low conventional mortgage rates, but another lender puts up the 20 percent at high interest rates -- typically 11 percent. A lot of people do this to rebuild their credit and refinance the 20 percent after two years. But if you try to refinance before the two years has passed, there's usually substantial penalties running into the thousands.
There are also lots of other goverment programs which will help you buy a house. For example, one program involves the government buying the house, you "renting" the house by making the mortgage payments, etc. for two years and, after you build your credit back up --- you buy the house from the government in two years. But you have to qualify as a low income borrower.
As you can see, there are lots of ways to qualify for a mortgage.
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Interesting post. |
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