Financing in Lancaster>Question Details

Jamie, Home Buyer in Lancaster, NY

Low credit score mortgage

Asked by Jamie, Lancaster, NY Wed Aug 10, 2011

Are their any companies in the area where I can get a mortgage with a low credit score? Last time I checked my scores vary from 560-590 in the 3 bureaus.

I know everyone will say to wait until my score is better but even with a high interest rate I will end up paying less in a mortgage than I will in rent

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With less than a 580 score, FHA financing requires a 10% down payment... so if you have that, then that could be an option. 580+ score and it just requires 3.5% down.

USDA Rural Development financing doesn't have a minimum score requirement, and there are two versions, Direct & Guaranteed. Direct is where you go direct to USDA, and they do not have a score requirement like I mentioned, but it's a longer process (which you may not care about). The Guaranteed version is where you go through a lender, and most will have 620 or 640 score requirements. You have to buy in specific areas (Lancaster town isn't eligible, but east of Cemetery Rd/Bowen Rd is, south of William St is, and north of Walden Ave is), and your income must be within certain limits (the limit is lower for the Direct version). You can find the income limits & eligible areas at http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do and USDA is 100% financing.

VA financing also doesn't have a minimum score requirement, but you need to be an eligible Veteran, and most lenders are looking for 600, 620 or 640 middle scores (your mileage may vary).

Conforming (Fannie Mae & Freddie Mac) loan programs are looking for at least a 620 score.

Those are the primary options today. There are non-conforming loan programs out there, but they only make about 2-3% of the total mortgages being made today, and are typically for borrowers with excellent credit but lack strengths in other areas (such as income, or buying an odd hard-to-market property, etc.), so probably wouldn't be something you should spend all of your time searching for (the effort & time would be better directed at improving your scores, even though you know I was going to say that).
1 vote Thank Flag Link Wed Aug 10, 2011
There are other factors besides credit that determine qualification, therefore visit with any local loan officer; after reviewing your overall financials, credit, debt, etc., a determination can be made; if you don't yet qualify, he/she may offer great suggestions as to what needs to be done in order to qualify in the near future....
0 votes Thank Flag Link Thu Aug 11, 2011
Jamie, how long ago did you check your scores? You may be pleasantly surprised if it's been awhile. You may indeed have options available to you including FHA or USDA. I highly recommend you talk to a qualified, licensed mortgage professional as soon as possible. I live and work in Lancaster as a licensed independent mortgage professional. My portfolio of lenders may offer an opportunity for your specific situation. Please call me at any time to discuss your options.

Ron Fronckowiak
716-685-9696
Web Reference: http://www.WNYmortgages.com
0 votes Thank Flag Link Thu Aug 11, 2011
Hi, Jamie Financing is still presumably available. However, not only your credit score but also credit history is taken strongly into account (i.e. any recent lates within the last 12-24 months, any sizable collections over than medical within the last 12-24 month. Any outstanding judgement. Did you have a bankruptcy or foreclosure within the last 24-36 months.) All of these could possibly disqualify you even with a 600-620 FICO. Furthermore, you may be restricted to just a total DTI (debt-to-income) ratio of up to 38-41%. That means that your new mortgage along with your other credit reporting debt can not exceed 38-41% of your base income (you may also not be allowed to count your overtime even if you're been getting it for over 2 years). And, finally, you may be required to put down a larger down payment and have at least 2-3 months of mortgage payments in reserves outside of the cash you'll need to close.

All or most of which could be avoided if you just increase your FICO to 640 or higher.

Talk to a local and licensed loan officer experienced in credit rehab and FHA financing to assist you further. Hope this helps.
0 votes Thank Flag Link Thu Aug 11, 2011
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