Fixing Your Credit To Qualify For Mortgage To Qualify And Get Best Rates


This BLOG On Fixing Your Credit To Qualify For Mortgage To Qualify And Get Best Rates Was UPDATED And PUBLISHED On June 9th, 2020

What does it look like to determine a loan to qualify for a mortgage to qualify and get the best rates

Advice In Fixing Your Credit To Qualify For Mortgage:

Once a buyer has decided in buying a new home, the next step is getting qualified for a home loan and to see how much you qualify for.

  • Two most important factors in qualifying for a mortgage are credit and income
  • There are specific minimum credit score requirements to qualify for a home loan, depending on the mortgage loan program
  • FHA requires a 580 credit score for a 3.5% down payment home purchase FHA Loan
  • Fannie Mae and Freddie Mac require a minimum credit score of 620 to qualify for a 3% to 5% down payment home purchase conventional loan
  • USDA Loans normally require credit scores of 640 or higher and credit score requirements on VA Loans normally require 620
  • credit scores
  • Jumbo mortgage lenders require credit scores of 700 from Jumbo Mortgage Loan Applicant
  • If borrowers have sufficient documented income but lower credit scores, fixing your credit to qualify for a mortgage is recommended
  • Fixing your credit to qualify for mortgage can take as little as 30 days or may take months
  • Many loan originators, like myself, will help and advise in fixing your credit to qualify for mortgage

In this article, we will discuss and cover Fixing Your Credit To Qualify For A Mortgage To Qualify And Get Best Rates.

Paying Down Your Credit Card Balances

One quick fix to boost your credit scores instantly is by paying down your credit card balances.

  • Consumers with high credit card balances or credit card balances that are to the credit limit, that will hurt credit scores
  • Getting credit card balances to 10% of available credit limit can really boost credit scores
  • Whether the credit card limit is $300 or $10,000, credit bureaus will use the percentage of the credit balance to the credit card limit, called credit utilization ratio, in determining consumer credit scores
  • Consumers should not have a zero credit card balance either
  • Having a zero credit card balance will also hurt consumer credit scores
  • The way credit bureaus determine credit scores is by dividing credit card balance by credit card limit and the lower the figure, the better the credit scores
  • Dividing a zero credit card balance by the credit limit will yield zero which is not good

There has to be a number and the lower that number is, the better credit scores will be.

Add Positive Credit If You Have No Credit

How to add a positive loan if you don't have a loan

Many consumers have low credit scores because they have no credit tradelines.

  • Consumers may not have any late payments for years and many who had prior bad credit do not want to open up new credit tradelines and pay cash so they do not want to get into debt
  • Unfortunately, not having active credit tradelines will not help consumers with their credit scores
  • Those with no active credit tradelines can easily boost their credit scores by getting secured credit cards
  • Secured credit cards are like traditional unsecured credit cards

However, the consumer needs to place a deposit with the secured credit card company, and the secured credit card company will grant a credit limit equivalent to the deposit.

Fixing Your Credit To Qualify For Mortgage With Secured Credit Cards To Re-Establish Credit

Consumers can use the secured credit card as a regular unsecured credit card and they do not have to pay off the credit balance every month

  • Minimum payment due is required and the payment history of the cardholder is reported to all three credit reporting agencies
  • Each secured credit card should easily boost the consumer’s credit scores by more than 20 points if the consumer has no active credit tradelines
  • A total of 3 to 5 secured credit cards is recommended
  • As the credit card payment history ages and if the consumer pays their monthly bills on time, the consumer’s credit scores will improve

Most secured credit card companies will increase the credit limit without asking for additional deposits.

Adding Yourself As Authorized User To Another Credit Card

Which means adding yourself as an authorized user to another credit card

Another way of increasing your credit scores is to add yourself as an authorized user to a family member and/or friend’s credit card account. There is risk associated with this. You need to make sure that the main cardholder has perfect payment history with no late payments and has a low credit card balance. Adding yourself on as authorized credit card user to another credit card can hurt you if the main cardholder will eventually maximize their credit card balance to the available credit limit or in the event if the main cardholder is ever late. Adding yourself as an authorized user to another credit card can be a quick fix to temporarily boost your credit scores but it is recommended that you take your name off sooner than later.

Fixing Your Credit To Qualify For Mortgage To Get Best Rates

Mortgage Rates are determined by the borrower’s credit scores. To get the best available mortgage rates, you need credit scores of higher than 740 FICO. The lower your credit scores are, the higher your mortgage rates will be. Mortgage lenders and creditors view lower credit score borrowers as higher risk borrowers so they charge higher interest rates with consumers who have lower credit scores. If you are looking for the best mortgage rates, fixing your credit and maximizing your credit scores will definitely get you the best mortgage rates.

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