My credit score is bad, but I have excellent rental history. Will this help when applying for a mortgage?

Asked by Dreamscar, 33647 Thu Apr 23, 2009

My credit score is 540, but I have never missed or been late on rent or my car payment for the last 4 years. I do have 4 credit cards that I failed to pay on in 2 years, which is why my score is so low. I have been told that making small payments on my credit cards now will have little effect on raising my score unless I pay the entire balance in one payment (which is not an option for me). I've been renting apartments for 4 years with my partner, but we are interested in getting a house at the end of the year. His credit score is in the low 600's. We both have steady full-time jobs and our monthly income combined is around $3,000. Am I eligible for a mortgage loan? If not, what must I do to to help my credit before October to get accepted?

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7
, ,
Thu Apr 23, 2009
Dreamscar,

FHA guidelines are actually not that cut and dry as previously stated. FHA is a make sense type of loan. Your rental history will help as long as it can be proven in the form acceptable to the investor or lender, i.e. consistent canceled rent checks or verification of rent from property management company. FHA does not have a minimum credit score, individual lenders/investors have overlays with their own minimum credit score. Some lenders still offer FHA mortgages with NO minimum credit score but expect to obtain a higher interest rate with higher fees. With your scenario, without speaking with you further, you will have to have some, if not all, of the following strong compensating factors, i.e. lower mortgage payment than rental payment, strong assets, low debt to income, etc. Your credit card payments are my biggest concern. You mention you failed to pay in the past 2 years...does this mean you have not been able to pay them off or you have not been able to make minimum payment? FHA focuses heavily on your last year of financial responsibilities. I have obtained loans for borrowers with credit scores in your range, do not be fearful to try.

I truly hope this helps, if you would like to discuss your options further and establish a plan to purchase, contact me at your earliest convenience.

Joshua A. Lerette
http://www.thetbmortgagepro.com
josh@thetbmortgagepro.com
Mobile - 727-488-7355 Available after hours
2 votes
Jake Johnson, , Melville, NY
Wed Jun 17, 2009
You can get an FHA loan with our company with credit scores as low as 531, however, you will have to pay all collections ( i.e. - credit cards) and have a good reason why you got behind. My email is jjohnson@lendamerica.com.
0 votes
Frank Olguin, , Fort Lauderdale, FL
Mon Jun 1, 2009
Dreamscar,
You got good info down below- but you do need minimum 620 credit score to qualify for the FHA 30 year fixed loan. My firm specializes in cases like yours, and we have a FREE internal credit repair program called (Power 4 Purchase) that adresses bad credit issues anywhere from 1 to 6 months timeframe, with the average client averaging 3 months to increase their scores. You mentioned October was your planned purchase date, so our program is ideal for you. Call me and I can give you individualized details to get your loan application started. Frank Olguin, 561-386-9731, Mortgage Banker, AmericaHomeKey Inc. Folguin@americahomekey.com.
0 votes
David Chambe…, , Saint Petersburg, FL
Thu Apr 23, 2009
Josh is a good mortgage broker, I have worked with him before. I would contact him.
0 votes
Lisa Reeves, Agent, Tampa, FL
Thu Apr 23, 2009
Some great information below - however it is my understanding that the minimum score is now 620 mid score for FHA? If you do not qualify then try doing minor clean-up on your partners score. You qualify for the 8K first time home buyer credit on your federal tax return if you don't own a home for the previous 3 years. Since you do not qualify - you would want to see what the total income of your partner is. Just so you know - Westshore Alliance is doing landtrust ownership multifamily units in the Westshore district. They will have downpayment assistance money and are looking for people under 80% Midincome and under 50% midincome. I should have a website soon for you if you are interested. Thanks.
0 votes
Christina Ba…, Agent, Tampa, FL
Thu Apr 23, 2009
You will not qualify for a mortgage, but your partner may. What is his income? How much down? Also can you get a co-signer?
Web Reference:  http://www.Teambarone.com
0 votes
Lori Hodgen, Agent, phoenix, AZ
Thu Apr 23, 2009
You may not qualify for a home loan, but your partner may.
Following is the basic FHA loan qualification guidelines.

Two Years of steady employment, preferably with same employer.
Last two years Income should be the same or increasing.
Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 580 or higher or no credit score at all.
Bankruptcy's must be at least two years old, with perfect credit since discharge.
Foreclosure's must be at least three years old, with perfect credit since.
Your new mortgage payment should be approximately 30% of your gross (before taxes) income.
These are some of the most basic of FHA guidelines for qualifying for a FHA loan. If you have answered yes to most of these statements, you probably qualify for a FHA mortgage loan.
0 votes
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