How To Raise Credit Scores To Qualify For Home Loans

This BLOG On How To Raise Credit Scores To Qualify For Home Loans Was Written By Gustan Cho NMLS 873293 And UPDATED And PUBLISHED On March 1st, 2020

How To Raise Credit Scores To Qualify For Home Loans
Gustan Cho Associates

How To Raise Credit Scores To Qualify For Home Loans:

Credit Scores are extremely important when it comes to qualifying for mortgages. On this blog, we will discuss ways on How To Raise Credit Scores To Qualify For Home Loans. Lenders need to analyze the following when it comes to qualifying borrowers and issuing pre-approvals:

  • Mortgage Borrowers income: Qualified Income
  • Mortgage Borrowers credit scores: Need to meet minimum credit score requirements
  • Mortgage Borrowers credit report: Just because borrowers meet minimum credit scores does not mean they automatically qualify for home loans
  • Borrowers assets and liabilities

In this article, we will cover and discuss improving credit scores to qualify for a mortgage.

Minimum Credit Score Requirements To Qualify For Home Loans

What are Minimum Credit Score Requirements To Qualify For Home Loans

Every loan program has minimum credit score requirements . There are times where borrowers may be short a few points in qualifying for a particular mortgage loan programs. Here are the minimum credit score requirements on mortgage loan programs:

  • FHA Loans: HUD, the parent of the Federal Housing Administration (FHA), requires a minimum credit score of 580 for 3.5% down payment home purchase FHA Loans
  • Borrowers with credit scores between 500 and 579 can qualify for FHA Loans
  • However, 10% down payment is required
  • Fannie Mae and Freddie Mac requires 620 credit scores to qualify for Conventional Loans
  • The Department of Veteran Affairs (VA) does not have a minimum credit score requirement with an approve/eligible per Automated Underwriting System Findings
  • However, it is rather difficult to get an approve/eligible per AUS Findings with credit scores under 580
  • USDA Loans normally require 640 credit scores to get an approve/eligible per GUS Findings
  • Most Jumbo Lenders require a 700 credit score to qualify for Jumbo Mortgage Loans

Second mortgage lenders such as banks will require a 700 credit score for HELOC and second mortgages.

How To Raise Credit Scores To Qualify For Home Loans

How To Raise Credit Scores To Qualify For Home Loans

Gustan Cho Associates are lenders with no lender overlays on government and conventional loans.

  • Our business model among our licensed loan officers is never turning away a borrower
  • “You do not qualify, come back a year later” is what most other loan officers from other mortgage companies say
  • However, that statement is a Taboo in our team of mortgage professionals
  • The minute a mortgage borrower contacts us is the minute they become our client
  • It is not if they qualify for a home loan but when they qualify for a home loan
  • Over 75% of our borrowers are folks who got a last-minute mortgage loan denial by other lenders or are stressing during their mortgage process

We help all of our borrowers who do not quite meet the minimum credit score requirements to qualify for a home loan.

Here is a recent email one of our borrowers sent us:

Gus, Just wanted to drop you an e-mail and tell you thanks for helping us get our credit scores up.  Just since we started all this in August my wife’s credit score on credit karma has went from a 586 to a 721 and mine has went from a 667 to 759.  I know you don’t like to toot your own horn but you really do know what your talking about when it comes to this stuff.  Thanks again for working with us. S.B.

Tips On How To Raise Credit Scores To Qualify For Home Loans

 

Borrowers do not have to spend hundreds or thousands of dollars to a credit repair consultants to boost their credit to qualify for mortgage loans. Whatever a credit repair company can do, borrowers can do it themselves without spending a dime. Remember that credit disputes are not allowed during the mortgage process. Late payments, charge offs, collections, tax liens, judgments, and other negative items cannot be under credit disputes during the mortgage process.

Quick Fixes To Increase Credit Scores

Here are some basic tips borrowers can do to boost their credit scores:

  • Pay down credit cards to 10% balance versus credit limit
  • If the borrower is married and has a spouse with low credit card balances with perfect payment history then have spouse add a borrower to spouse’s credit card as an authorized user
  • However, the spouse’s credit cards need to have perfect timely payments and low credit card balances or it will backfire
  • Go to www.gustancho.com and click RESOURCES and click down to BOOST YOUR CREDIT WITH INSTANT CREDIT.
  • Follow instructions
  • You can get $5,000 unsecured jewelry revolving credit account by purchasing $100 worth of jewelry
  • This will increase credit scores
  • Buy your wife the jewelry and not your girlfriend. Lol
  • If you have current credit cards and payment history is perfect, contact them and see if they can get credit limit increase
  • The higher available credit on a credit card, the higher a consumer credit scores

Doing one or a combination of the above will definitely raise credit scores.

Case Scenario In Raising Credit Scores

For example, paying down one maxed out credit cards can easily boost credit scores by 40 or more points. For those who have no revolving credit, getting a secured credit card with a $500 credit limit can easily raise credit scores by 30 or more points. Adding yourself to a spouse’s credit card as an authorized user can easily raise credit scores by 30 points.

  • However, we want to increase borrowers credit scores much as possible to get them the best rate and an approve/eligible per Automated Underwriting System
  • Our borrowers will get approved so no worries
  • We want to boost mortgage borrowers credit scores as high as possible
  • We do just want to get our borrowers approved and closed but also to get them the lowest possible mortgage rates

The higher a mortgage borrower’s credit scores, the lower their mortgage interest rates.

Credit Disputes During Mortgage Process

Many home buyers think that hiring a credit repair company will help them raise their credit scores and help them qualify for mortgage loans. Unfortunately, credit repair prior to the mortgage process can backfire in qualifying for mortgage loans and this is why:

  • Credit Disputes are not allowed during mortgage process 
  • Reason being is that once a consumer does a credit dispute on a derogatory credit item, the credit bureaus will automatically discount the disputed item from the credit scoring model
  • What this means is if the verbiage “Consumer Disputes This Credit Item” is stated, that negative item is automatically deleted from the credit scoring formula
  • So the consumer credit scores will go up because that derogatory item is non-existent on the credit scoring formula

This is the reason why credit disputes are not permitted during mortgage process.

Credit Disputes Exempted From Disputes During Mortgage Process

There are certain credit disputes that are exempted from credit disputes during mortgage process.

  • Medical Collections are exempt from credit disputes no matter how much the outstanding balances are
  • Non-Medical Collections with zero outstanding balances are exempted from credit disputes during mortgage process

Non-Medical Collections with an aggregate outstanding balance of under $1,000 outstanding balances are exempted during mortgage process.

How To Quickly Boost Credit Scores Overnight

One trick of the trade to raise credit scores is if borrowers have medical collections or non-medical collections with aggregate outstanding collection balances under $1,000, then do credit disputes on them and this will raise borrower’s credit scores. Need to be careful when using this strategy because once consumers do a credit dispute on medical collections, it will instantly raise credit score but once the dispute is resolved, it will drop the credit scores again. Timing is key to this strategy.

Dangers Of Hiring Credit Repair Companies During Mortgage Process

Many Loan Officers do not realize that credit repair companies can backfire on them. Credit repair companies can use certain techniques in deleting negative items and/or erroneous information off consumer credit reports. However, one thing that they need to realize is that expunging and/or deleting public records does not work.

Credit Fixes That Work Versus Not Work

Here are things that work and things that do not work:

  • Late payments can be deleted and nobody can find out about it
  • Collection accounts and charged off accounts can be deleted and lenders cannot find out about it
  • Tax Liens and Judgments that are deleted will be discovered by lenders because all lenders will do a third party national public records search
  • Other public records such as bankruptcies, short sales, deed in lieu of foreclosures, and foreclosures that are deleted off credit reports will be discovered by the lender when they do a national public records search
  • Federal student loans, child support, alimony, and other public records not reporting on credit reports will be discovered when mortgage lenders do a third party public records national search

This BLOG On How To Raise Credit Scores To Qualify For Home Loans Was UPDATED On December 18th, 2019

Comments: 2

Leave a comment