Credit Improvement During Mortgage Process To Qualify For Mortgage

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Credit Improvement During Mortgage Process To Qualify For Mortgage

This BLOG On Credit Improvement During Mortgage Process To Qualify For Mortgage Was UPDATED On October 31st, 2018

Advice On How To Tackle Credit Improvement During Mortgage Process

Credit Improvement During Mortgage Process should be done prior to mortgage loan application.

Here are the reasons why:

  • The reason being is because lenders will use the credit scores and credit report initially submitted with the mortgage loan application
  • Whether credit scores increases or decreases has no bearing on mortgage process
  • Credit scores fluctuate month after month
  • If credit scores has drastically gone up during the mortgage process, we can use the higher credit scores for pricing
  • Middle of three credit scores that was used to qualify when borrowers first got pre-qualified is the credit scores lenders will be using throughout the entire mortgage process if scores dropped
  • Both home buyers who need to qualify for a home purchase mortgage
  • Homeowners thinking of refinancing their current home loans need to think about credit improvement during mortgage process
  • If scores dropped, scores prior to actually submitting their mortgage loan application for processing and underwriting will be used
  • It does take time to work on credit improvement
  • Borrowers should plan months ahead if they are trying to get their credit improvement done

Credit Scores And Credit Report Prior To Applying For Mortgage

Many borrowers think that just because they meet the minimum credit score requirements to qualify for mortgage that they will automatically meet the credit requirements to qualify for a mortgage. This is not always the case. Credit scores are important. It is just a piece of the overall credit requirements to qualify for home loans.

Here are other factors that goes into qualifying credit in the mortgage process:

  • Credit tradelines are viewed and taken into consideration by mortgage underwriters:
    • Just because consumers open a secured credit card with a $500 credit limit does not mean they have credit tradelines
  • A credit tradeline is a credit account that has been seasoned for at least one year and preferably two or more years
  • Late payments in the past 12 months is considered serious and credit risks
  • Most lenders do not want to see any late payments in the past 12 months
  • Can only have one 30 day mortgage late payment in the past 12 months
  • Multiple 30 day late payments will disqualify borrowers from qualifying
  • Late payments after bankruptcy, deed in lieu of foreclosure, foreclosure, and short sale can be deal killers
  • Most lenders will not accept any borrowers with late payments after bankruptcies and/or foreclosures
  • Credit disputes on non-medical outstanding collections and charge off accounts are not permitted during the mortgage process
  • Maxed out credit cards can plummet a borrower’s credit scores
  • It is best that borrowers pay down their credit card balances prior to applying for a home loan

Borrowers Who Need Credit Improvement During Mortgage Process

Bad credit affects millions of consumers today.

  • Most consumers were affected by the 2008 real estate and mortgage meltdown
  • Tens of millions of consumers had filed for bankruptcy
  • Or had a housing event such as a foreclosure, deed in lieu of foreclosure, or short sale
  • There are still tens of millions of Americans who has not yet recovered from the Great Recession of 2008 and are in jobs where they are overqualified
  • Many successful business owners have closed their businesses
  • They sought wage earner jobs they were over qualified
  • While others completely changed fields and went back to school to learn a new trade
  • One of the most industries affected by the 2008 Great Recession was the mortgage industry followed by the real estate and construction industries
  • Millions of loan officers left the industry for many years
  • Some returned to become loan officers again to find out that the whole mortgage business has went through a major overhaul
  • Mortgage loan originators now needed to get licensed, pass state and federal criminal background investigations, and pass credit checks
  • Loan officers now had to enroll and pass a 20 hour pre-licensing NMLS course
  • They also had to apply for state licensing in every state they want to originate mortgage loans

Mortgage Industry Now Versus Before Great Recession

Getting a residential mortgage loan is now different than it used to be. The SAFE Mortgage Act was implemented and launched. FHA, VA, USDA, FANNIE MAE and FREDDIE MAE have come up with new rules and regulations. Credit Improvement During Mortgage Process needs to be done months prior to applying for mortgages.

Here are some of the changes of new mortgage rules and regulations:

  • Minimum Credit Score requirements for FHA is 580 FICO
  • For Fannie Mae and Freddie Mac is 620 FICO
  • Maximum debt to income ratios for FHA Borrowers with credit scores of higher than 620 FICO is 46.9% DTI front end ratio and 56.9% DTI back end ratio
  • Under 620 FICO credit scores debt to income ratio requirements on FHA Loans is 43% DTI
  • Outstanding collections and charge offs do not have to be paid off to qualify for home loans
  • This holds true unless the lender has overlays on collections and charge off accounts
  • 2 year waiting period after Chapter 7 Bankruptcy discharged date for FHA, VA Loans
  • 3 year wait period after Chapter 7 on USDA Loans
  • 4 year waiting period to qualify for Conventional Loan after a Chapter 7 Bankruptcy discharged date
  • 4 year waiting period after a deed in lieu of foreclosure, and short sale to qualify for Conventional Loans
  • 7 year waiting period to qualify for conventional loan after a standard foreclosure
  • 3 year waiting period after a foreclosure, deed in lieu of foreclosure, short sale to qualify for a FHA Loan and USDA Loan
  • 2 year waiting period to qualify for a VA Loan after a Chapter 7 bankruptcy discharged date
  • 2 year waiting period after a short sale, deed in lieu of foreclosure, and foreclosure to qualify for a VA Loan

VA And FHA Chapter 13 Bankruptcy Lending Guidelines

There is no waiting period to qualify for VA and FHA Loans after a Chapter 13 Bankruptcy discharged date. Borrowers can qualify for VA and FHA Loans one year into a Chapter 13 Bankruptcy repayment plan. Need approval of the Chapter 13 Bankruptcy Trustee:

  • There is a two year waiting period to qualify for a Conventional Loan after a Chapter 13 Bankruptcy discharged date
  • 4 year waiting period after Chapter 13 dismissal date on Conventional Loans
  • There is no waiting period to qualify for VA and FHA Loans after a Chapter 13 Bankruptcy dismissal date

How Can Credit Improvement During Mortgage Process Be Done

Most of our borrowers who contact us are ready to become homeowners and come to us for advice in credit improvement so they will be qualified for a mortgage in the next few months.

  • There is no charge in contacting us
  • Our national team of mortgage professionals will help any home buyer who needs help getting qualified for a loan program that suits their needs
  • Please contact us at Gustan Cho Associates at Loan Cabin Inc. at 262-716-8151 or text for faster response or email us at gcho@gustancho.com
  • Gustan Cho and all of his loan officers are available 7 days a week, evenings, weekends, and holidays to take on your call and answer any questions you may have

Whether you have low credit scores, bad credit, outstanding collection accounts, charge off accounts, judgments, prior bankruptcy and/or foreclosure, tax liens, late payments, or late payments after bankruptcy and/or foreclosure, please do not hesitate to contact us. We are confident we can help you secure a home loan sooner than you may think it is possible.

Qualifying For Mortgage With Direct Lender With No Overlays

Over 75% of borrowers who contact Gustan Cho Associates Mortgage Group are borrowers who gotten a last minute mortgage loan denial. Or are going through a tough mortgage process with their current lender and cannot meet their closing date on their home purchase. We help our borrowers with Credit Improvement During Mortgage Process so they can qualify for home loans.

  • There is no reason why any borrower with a pre-approval should not be closing on their home loan and going through a major loan process
  • There is only one reason and one reason only for this
  • The loan officer did not properly qualify the borrower or did not know their mortgage guidelines or their company’s overlays
  • The Gustan Cho Team at Loan Cabin Inc. NMLS 1657322 is a five plus star national Fannie/Freddie/Ginnie Mae Direct mortgage banking firm licensed in multiple states
  • Our firm is under the leadership of Massimo Ressa and Gustan Cho
  • We have a national reputation of no overlays on government and Conventional Loans
  • We also have a national reputation and are known for its 21 day closings.  The Gustan Cho Team at Loan Cabin Inc.

Mortgage Family is respected by ALL mortgage industry professionals for our leadership abilities and knowing the importance of not just closing loans, but closing loans on time. We have a policy at The Gustan Cho Team at Loan Cabin and its licensed and support staff are available 7 days a week, evenings, weekends, and holidays.

This BLOG On Credit Improvement During Mortgage Process Was UPDATED On October 31st, 2018

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