Qualifying For Florida Home Loans With Bad Credit

This article covers Qualifying For Florida Home Loans With Poor Credit. Thousands of families are moving to Florida to call it home. With the great economy, great job opportunities, low cost of living, no state income taxes, and affordable housing, Florida is one of the hotspots for new families. The governor, Ron DeSantis, and politicians are pro-business. Florida never completely shut down the state during the coronavirus outbreak.

Florida Leads the Nation with Home Sales

Florida Leads the Nation with Home Sales

Due to lenders lightening up credit standards, many homebuyers can now qualify for a mortgage in Florida with less than perfect credit:

  • It is possible to qualify for a mortgage with bad credit 
  • How to improve credit to qualify for a mortgage
  • Will I close on my home loan once I am pre-approved?
  • Can I qualify for a mortgage after bankruptcy?
  • Can I keep my existing home and buy a new home?
  • Factors determining mortgage eligibility

Remember not all lenders have the same mortgage guidelines. Just because one lender denies you a mortgage does not mean another lender will not approve.

Qualifying for a Mortgage in Florida with Less than Perfect Credit

This article on qualifying for Florida Home Loans with bad credit is a comprehensive commonly asked question and answers not just by borrowers but by many real estate agents.

Home Buyers can qualify for Florida Home Loans with bad credit. Borrowers do not have to pay off outstanding collection accounts and charge off accounts with Gustan Cho Associates to qualify for Florida Home Loans With Bad Credit. However, need to have re-established after a period of bad credit and not have any late payments in the past 12 months. Many folks think that just because they have had a few years of bad credit and collections and charged-off accounts on their credit report that they would not qualify for a mortgage loan. This is absolutely not the case. After reading this BLOG on qualifying for Florida Home Loans with bad credit and low credit scores.

Our viewers will understand that they may qualify for a home loan without any issues.

Q. Are There Tips Where I Can Improve My Credit Scores?

A: Here are things that you can do to improve your credit scores:

  • Make timely monthly payments on monthly payments and credit payments that reflect on the credit report
  • Having no active revolving credit tradelines will yield a low credit score
  • Get three to five secured credit cards and keep the credit balance below 10% of the credit limit for maximum credit score optimization
  • Credit account payments
  • Mortgage
  • automobile payment
  • Other monthly obligations
  • Keep the balances low
  • The older bad credit is, the less impact it will have on credit scores

Normally, bad credit items that are older than 2 years will not greatly affect credit score.

Q: What Is The Best Credit Scores?

A: Credit scores normally have a range from a low of 300 to a high or 850

  • Credit scores fluctuate month to month depending on how creditors are reporting it and how much debt it has accumulated and how much paid on debt
  • If the credit score is over 740, they are considered to have great credit scores

Any borrower who has 740 credit scores or higher will get the lowest mortgage interest rates.

Q: What Are Credit Scores Required To Qualify For Florida Home Loans

A: The Minimum Credit Scores required depends on the loan program and the individual lender:

  • Most lenders have minimum credit score requirements of at least 620
  • A large percentage of lenders require a minimum score of 640 as part of their overlays
  • The minimum credit score required to qualify for an FHA loan with a 3.5% down payment is 580 Credit
  • VA Loan does not have a minimum credit score requirement nor debt to income ratio requirement
  • The minimum credit score required to qualify for USDA Loan is 580
  • The minimum credit score required to qualify for a Conventional Loan with Fannie Mae and Freddie Mac is 620
  • Just because borrower meets the minimum credit score requirement does not mean that they qualify with the lender they consult with
  • That lender may have lender overlays which are higher standards than the minimum loan program guidelines

Gustan Cho Associates does not have any overlays on government and conventional loans.

Other Factors Determining Mortgage Eligibility

Besides credit scores, there are other qualifying underwriting mortgage requirements like the following:

  • income
  • debt to income ratio
  • debt, assets
  • other credit criteria depending on the lender

Q: Should Old Collections Be Paid?

A: Borrowers do not have to pay off outstanding collection accounts with balances to qualify for Florida Home Loans with Gustan Cho Associates:

  • If the collection is a fairly new collection account, you might want to negotiate if they will take a small percentage of what is due and settle the debt
  • See if the creditor will do a pay for delete whereby settling collection account, they will delete it off the credit report
  • If the collection account is nearing its statute of limitation period or is fairly an older collection account, paying it off will start the clock again

The start clock is from the “date of last activity”

Derogatory Credit Tradelines From Credit Report

It needs to be on credit 7 years from the payment date (DLA) for it to be deleted from the credit report

  • However, a paid $0 balance collection is always better than a collection with a balance
  • Borrowers do not have to pay outstanding collections and charge offs to qualify for Florida Home Loans with Gustan Cho Associates
  • This holds true since we have no FHA Lender Overlays on collection accounts

Q: How Do I Get Incorrect Items Off My Credit Report?

A: Each credit bureau reports information provided to them from specific companies:

  • Borrowers find something wrong on the report they first have to identify which bureau is reporting it
  • Then need to write a letter of dispute to that credit bureau and they will contact the company to verify the debt
  • If the company cannot verify it or does not respond the bureau must remove the information within 30 days
  • Keep in mind that you cannot have credit disputes on non-medical collection accounts which total $1,000 or more on the credit report
  • Borrowers cannot have any credit disputes on charge off accounts on the credit report

Borrowers are allowed to have credit disputes on medical collections with outstanding balances and zero balance non-medical collection accounts.

Q: Updating Wrong Information On Credit Bureaus During Mortgage Process

Wrong Information On Credit Bureaus During Mortgage Process

Consumers can go directly to the credit bureaus with the proof of payment or challenge and they will amend it for our report, then we can get a new credit report score based on this information:

  • This is called a rapid rescore
  • There is a cost for this service from the credit bureaus and it can get expensive, so ask the loan officer for an estimate prior to having this done

Q: I am having financial difficulties, what should I pay first?

A: Borrowers normally cannot have any late payments in the past 12 months to qualify for a mortgage:

  • Borrowers should always pay Florida mortgage loans first, then installment debt such as student loans and car payments
  • Call installment lenders right away
  • If the account is in good standing many times they can defer student loans or put a car payment on the end
  • This will help maintain good credit history

Q: Do Judgments Have To Paid Off To Qualify For Florida Home Loans?

A: Yes. Judgments and Tax Liens and other public records need to be satisfied prior to closing or at closing:

  • Most lenders require a judgment to be paid in full or “satisfied.”
  • Consumers will need to contact the creditor and negotiate the payment, then provide the credit bureau with written proof so they can update it to a paid status
  • Paying off a judgment will not remove it from your credit report; it will remain for at least 7 years

HUD will allow for a written payment plan on judgments and tax liens, however, it needs to be seasoned for three months and three months canceled checks needs to be provided.

Q: Once I Get Pre-Approved, Does It Mean I Will Close? 

A: A pre-approval says you have met the preliminary review of income, debt, employment, and assets:

  • There is no reason why a pre-approved borrower should not close
  • Not all loan officers pre-approve borrowers the same way
  • Although we never write a pre-approval unless we have done our research and feel confident the loan will close, sometimes things are out of our control
  • It is never a done deal until the loan closes and funds
  • Gustan Cho Associates closes 100% of its pre-approvals

Q: Can Borrowers Purchase New Furniture During Loan Process?

A:  NO, once the mortgage process starts do not purchase anything or charge on credit cards:

  • Small purchases like gas and things are normal but don’t make any large purchases
  • Large purchases on credit will affect the borrower’s debt to income ratios
  • Do not apply for new credit or use any credit on any purchases unless borrowers speak to the loan officer first

Q: Car Purchase During Loan Process

A:  A New car purchase can be a deal killer during the mortgage process:

  • Borrowers should talk with a loan officer prior to purchasing the vehicle
  • We have had several clients who just bought a new car and then try to purchase a home, but can’t qualify now because of the new car payment

Trading a car for another new car with a lower monthly car payment may be alright, however, talk to the loan officer first.

Q: Negative Impact Of Credit Inquiries & Qualifying For Florida Home Loans

A: Do not apply for new credit during the mortgage process:     

  • Numerous inquiries tell the credit bureaus you are attempting to get credit with a lot of companies
  • This can show an out of control borrower which creates a larger risk of default
  • So the more inquiries consumer have can cause the score to go down

Q: Will A Repossession Affect Me Qualifying For FHA Florida Home Loans?

A: NO:

  • An auto repossession does not affect you getting an FHA Loan at Gustan Cho Associates Mortgage Group

Q: How Does Chapter 7 And 13 Bankruptcy Affect Qualifying For Mortgage?

A:  Borrowers can qualify for a mortgage after a Chapter 7 Bankruptcy and Chapter 13 Bankruptcy:       

  • There are minimum waiting periods to meet to qualify for mortgages after bankruptcy
  • There is a two year waiting period after a Chapter 7 Bankruptcy discharged date to qualify for an FHA Loan
  • Homebuyers can qualify for an FHA Loan one year into a Chapter 13 Bankruptcy Repayment Plan with the approval of the Chapter 13 Bankruptcy Trustee which Trustee’s normally give approvals all the time
  • There is no waiting period to qualify for an FHA Loan after a Chapter 13 Bankruptcy discharged date
  • Conventional loans require a four-year wait after a Chapter 7 Bankruptcy discharged date
  • To qualify for a conventional loan after a Chapter 13 Bankruptcy, Fannie Mae and Freddie Mac require a two-year seasoning requirement
  • Borrowers with Chapter 13 dismissal, need to season four years in order to qualify for a conventional loan

Non-QM loans do not have a mandatory waiting period after bankruptcy or foreclosure. Gustan Cho Associates offers non-QM loans one day out of bankruptcy.

Q:  Can I Qualify For Loan With Delinquent Child Support Payments?

A: Delinquent Child Support Debt Reporting On Credit Report:

  • Child support payments need to be timely

Child Support laws vary by State;

  • in Texas typically child support will not show on a credit report until the payer becomes delinquent and a judge orders wage garnishments
  • Then every payment will be posted on the credit report as late since the original agreement was not paid as agreed
  • Typically most lenders will require proof of on-time payments for at least one year
  • Once the behind payments are paid in full the account will reflect current

Q: Debts From Ex-Spouse On Credit Report And How It Affects Borrower

Debts From Ex-Spouse On Credit Report And How It Affects Borrower

A: Will Debts From My Ex-Spouse On My Credit Report Affect Me?

  • Once you are divorced, we will request a copy of the signed divorce decree from the Judge
  • This document will identify which party is responsible for what debt
  • We then can take this debt out of borrower debt to income ratio
  • KEEP IN MIND*** Any debt spouse is responsible for after the divorce should be refinanced into only their name
  • Just because they are awarded the debt in the divorce, does mean they will make the payments

If it is a joint account and they do not make the payments, it will damage the credit report.

Q: Co-Signing Prior Or During Mortgage Process For Florida Home Loans

A: Will Co-Signing Debt Affect My Mortgage Process?

  • Yes, this debt will show on credit and will be counted towards debt to income ratio qualification numbers

It can not be counted if the borrower has proof that someone other than the borrower has been making payments on the debt by showing 12 months’ canceled checks and/or bank statements.

Q: Keeping Existing Home And Buying Another Home

A: Can I Keep My Existing Home And Purchase Another Home?

  • Most Florida mortgage lenders will allow doing this
  • Lenders may require reserves and often do require that borrowers have a higher amount in savings
  • Lenders may require borrowers have 6 months of the existing payment in savings AFTER paying all of the closing costs and a down payment of a new home
  • Borrowers can use 75% of potential rental income on exiting property if they have at least 25% equity per appraisal

Home Buyers who are renting a current home will need a signed 12-month lease with copies of canceled checks for the deposit and the first month’s rent.

Q: Will Credit Scores Decrease After Home Purchase?

A: Yes:

  • Consumer credit scores will often drop after a home purchase
  • This is because of the high mortgage loan balance and tradelines are reported on the credit report
  • Once monthly payments have been seasoned for six or more months, credit scores will go back up and even go up higher

Credit scores will fluctuate month to month depending on many factors.

Q: Is Hiring A Credit Repair Company Recommended For Florida Home Loans

A:  Credit repair is not recommended unless absolutely necessary during the mortgage process:

  • Remember that borrowers cannot have credit disputes during the mortgage process on non-medical collections with balances of over $1,000
  • Borrowers cannot have any credit disputes on charge off accounts
  • Credit Repair companies can delete public records such as judgments, tax liens, bankruptcies, foreclosures, and short sales of the credit report
  • However, all lenders will do a third party nationwide public records search
  • So all public records that do not report on the credit report will be discovered during the third party public records search
  • Hiring a credit repair company during the home buying process can and often will delay the mortgage process
  • Although there are some good and reputable credit repair companies, many are only taking clients money and not doing what they promise
  • As a company, we do not support or refer to a specific credit repair company
  • Should look into a specific company, ask for references and check with the BBB for complaints

Getting Pre-Approved For Florida Home Loans

Home Buyers who are ready to see how much they qualify for and getting pre-approved for a mortgage today, please contact us at Gustan Cho Associates.

  • We are a five-star, top-rated mortgage company licensed in multiple states with no lender overlays on government and conventional loans
  • Gustan Cho Associates has a national reputation for its 21-day loan closings and no overlay policy

The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiries either by phone, text, or email. Call us at 262-716-8151 or text for a faster response. Borrowers can email us at [email protected] Gustan Cho Associates is a mortgage banker, correspondent lender, and we have the ability to broker non-QM and specialty loans. Some of our popular non-QM and alternative loan programs include no-doc home loans for primary residence homes, non-QM mortgages one day out of bankruptcy and foreclosure, bank statement loans for self-employed borrowers, P and L stated income loans, asset-depletion mortgages, 90% LTV jumbo mortgages, non-QM jumbo mortgages with credit scores down to 500 FICO, and dozens of other specialty mortgage loan programs.

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