If you are a first time home buyer, your first step should be to consult a mortgage lender who you feel comfortable with and decide what area you want to purchase your home. Your mortgage loan originator will go over your income, credit, credit report, and credit scores as well as your other monthly debts to determine what is the maximum amount you can afford on your mortgage payments. Just because your mortgage loan originator gives you a maximum monthly mortgage cap does not mean your mortgage payments will be that amount. It is just a number you cannot surpass that figure. Your mortgage loan originator will then analyze your mortgage application and credit report to see if you currently qualify for a mortgage loan. Many mortgage loan originators will have the first time home buyers prep program where they will counsel and guide mortgage loan applicants with bad credit.
These Are The Bare Minimum Requirements To Qualify For A Mortgage Loan
1. Need current verifiable income which is likely to continue for the next three years.
2. Minimum credit scores of 580 FICO score to qualify for a 3.5% down payment mortgage loan. Credit scores between 530 FICO and 580 FICO, you need a 10% down payment.
3. 43% is maximum debt to income ratios for scores under 620 FICO. Credit scores for 620 FICO or higher, the debt to income ratios can be capped at 56.9%.
4. You cannot under any circumstances have any late payments in the past six months. Majority of the mortgage lenders do not allow any late payments in the past 12 months. You also cannot have any bank overdrafts in the past 12 months.
5. You can have prior bad credit that is over a year old including open collections, charge offs, late payments, bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, judgments and tax liens. There are mandatory waiting periods after a bankruptcy, foreclosure, short sale, and deed in lieu of foreclosure requirements. You must have judgments and/or tax liens paid off or have a payment agreement with at least three months of timely payments and provide three months of cancelled checks.
Income And Credit: Two Important Factors
Income and credit is the two most important factors that determine your mortgage loan approval. If you have income but bad credit, you will get a mortgage approval but the key question is when. If your credit is really bad and you had multiple recent late payments, then you might need to wait at least six months to get a six month on time payment history or you might need to boost up your credit scores by adding positive credit such as getting a few secured credit cards. However, if you have excellent credit but no reportable income, you will have a problem qualifying for a mortgage loan. Mortgage lenders require income because they need to know that you are able to be able to make the minimum required mortgage payment. Cash income does not count and all income needs to be reportable income and needs to be verified by the Internal Revenue Service.
Income But Bad Credit: Can I Qualify For Home Loan?
If you have income but terrible credit and recent late payments, you can enroll in our First Time Home Buyers Prep Program. Anyone who is from Illinois, Florida, California, Wisconsin, and Indiana can take advantage of our free First Time Home Prep Program. The First Time Home Prep Program was created for those who have income but very bad credit who will qualify for a mortgage loan after we can do a quick fix on their credit profile. With our First Time Home Prep Program, the mortgage loan borrower will be advised on how to repair their credit, improve their credit scores, and manage their finances to prep them in becoming a first time home buyer or home buyer within the next six to twelve month. Please contact me at 262-716-8151 or at www.gustancho.com . For those who just had a bankruptcy discharge or had a recent foreclosure, deed in lieu of foreclosure, or short sale, the time is now to start re-establishing your credit.
By Gustan Cho