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How Fast Can I Improve Credit Scores To Qualify Mortgage

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How Fast Can I Improve Credit Scores To Qualify Mortgage

This BLOG On How Fast Can I Improve Credit Scores To Qualify Mortgage Was UPDATED On February 10th, 2019

It is possible for a home buyer to qualify for a home loan with bad credit. Borrowers who do not meet the minimum credit scores to qualify home loans can improve credit scores to qualify mortgage. How Fast Can I Improve Credit Scores To Qualify Mortgage?

  • There are several variables in getting a home loan with bad credit
  • Borrowers need to meet minimum credit score requirements
  • Those who do not meet the minimum credit score requirements can improve credit scores to qualify mortgage
  • Lenders understand that people go through periods of bad credit due to the following:
    • loss of employment
    • medical reason
    • divorce
    • other extenuating circumstances
  • The above reasons can lead to loss of income or substantial reduction of income
  • This causes borrowers get  behind in making their regular minimum monthly payments
  • This affects their ability to make their monthly payments where their credit scores drops
  • Lenders do have minimum credit score requirements to qualify for mortgage
  • For example, to qualify for a FHA loan with a 3.5% minimum down payment, borrowers needs a 580 credit score
  • Borrowers can qualify for FHA Loans with credit scores under 580 but 10% down payment is required

Qualifying For Mortgage With Credit Scores Under 620

However, having credit scores under 620, the debt to income ratios are restricted at 43% DTI.

  • Borrowers with credit scores over 620 then the debt to income ratio gets greatly increased to 56.9% DTI
  • To qualify for a conventional loan, the minimum credit score required is 620
  • However, with conventional mortgage rates, the lower the credit score, the higher mortgage rates
  • To get the best conventional mortgage rates, borrower needs a credit score of over 740
  • With mortgage rates, anyone with a 640 credit score they will get the best FHA mortgage rates

Credit Score Requirements On Loan Programs

Every loan program has their minimum credit score requirements:

  • Minimum credit score of 580 is required for 203K Rehab Loans
  • A 620 credit score is required for bank statement mortgage loans for self employed borrowers
  • Non-QM Loans require a 640 credit score
  • Portfolio lenders who specialize in condotel loans and non-warrantable loans require a minimum of a 680 credit scores
  • Most Jumbo Lenders require credit scores of at least a 700 scores
  • To get the best Jumbo mortgage rates, lenders will require credit scores north of 740

Getting Qualified For Home Loan With Bad Credit

Home Buyers thinking of buying a home in the very near future, should consult with a lender as soon as possible and see if they qualify for mortgage.

  • Borrowers not qualified for mortgage due to lower credit scores, there are some quick fixes loan officers can advise to boost credit scores
  • For example, if credit scores are between 500 and 579,  borrowers will not qualify for a 3.5% down payment FHA Loans
  • The minimum credit score required for a FHA loan with 3,5% down payment is 580
  • Getting a one point boost in credit scores should not be too difficult

Boosting Credit Scores To Improve Credit Scores To Qualify Mortgage

Credit Scores go up and down. There are quick fixes to improve credit scores to qualify mortgage.

  • Borrowers can probably get a several point boost in credit scores by just paying down credit card balances
  • Or if credit scores are at 579 because borrower has no active credit accounts, getting one secured credit card can boost credit scores up by 20 or more points
  • There are ways of boosting credit scores by adding oneself to someone else as authorized user
  • However, to have this authorized user credit card to work, the authorized user needs same last name as main cardholder and/or have the same billing address

How Fast Can My Credit Scores Be Boosted Up To Qualify For mortgage?

Improving credit scores takes time and does not happen overnight:

  • For example, if borrowers were to get a secured credit card to boost credit scores, it will take at least a week or more to actually get secured credit card
  • Once consumers use it, depending on when they get secured credit card, it will not post to the three credit reporting agencies until the end of the month
  • New credit scores will be reflected in the beginning of the month
  • For example, say borrower applies for a secured credit card May 1
  • They will most likely get secured credit card on May 10th
  • Borrowers use credit card and credit statement will post by May 31st
  • The three credit bureaus will have new credit posted by June 5th
  • So in a little over 30 days, new credit card will be posted to all three credit reporting agencies
  • Same concept goes with high balance credit cards
  • Borrowers intending on paying down credit cards to boost credit scores need to pay for them early enough
  • This way it posts to all three credit reporting agencies by the end of the month
  • New credit balance information will be reflected on credit report by the beginning of the following month

Home Buyers who need to qualify for mortgage with direct lender with zero mortgage overlays on government and conventional loans can contact us at The Gustan Cho Team at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho

www.gustancho.com

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