If a home buyer has a less-than-perfect credit score, how hard will it be for them to get a mortgage these days?

Asked by Hannah Desmond, Fort Lauderdale, FL Thu May 16, 2013

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Curly Sue, , Texas
Fri May 17, 2013
My lender can go as low as 580 credit score...that's much less-than-perfect!
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Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Fri May 17, 2013
Good morning Hannah,

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140

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Ray Akers, Agent, Seattle, WA
Thu May 16, 2013
Times have changed. Today, it's more difficult to qualify for a mortgage. Less-than-perfect credit can be a problem if the credit score is below 620. You'll find more mortgage options if your credit score is above 720, and you'll discover interest rates will be lower. The exception to this is FHA. FHA was designed for buyers that have some credit boo boos, and a smaller down payment. With FHA, you need only 3.5% down payment (which can be gifted by a family member) and your credit score can be as low as 620.
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Johan Tong, Agent, Seattle, WA
Thu May 16, 2013
Credit score affects your interest rate. As long as you have a decent credit, you will still get a mortgage. Just go talk to more loan officers.
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Dave Skow, Mortgage Broker Or Lender, Seattle, WA
Thu May 16, 2013
define " less than perfect "
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Kim Mulligan, Agent, Seattle, WA
Thu May 16, 2013
The answer is it depends less than perfect is OK, it's harder if it's far from perfect. It's best to work with a mortgage professional on this. Then you can find a real estate agent that is used to dealing with all kinds of home buying programs. There are plenty of programs to help give reliable people a toe hold up the property ladder.
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Michael Litc…, , Clovis, CA
Thu May 16, 2013
That would depend just where you are at with your score. I would highly suggest talking to a Mortgage Consultant to see what you can either qualify for or what you need to do to repair a few things on your credit to get to where you need to be. Because I am in California i have no suggestions for you to go and speak with, but I have heard that Quick Loans is a good place to start. If they are local I would suggest to go and talk with them in person to see what they can do for you.

Michael Litchenberg
DRE# 01758814
(559) 472-5120
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