Improving Credit Scores With Low Credit Card Balances

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Improving Credit Scores With Low Credit Card Balances

Advice In Improving Credit Scores With Low Credit Card Balances

Improving Credit Scores With Low Credit Card Balances is the fastest and easiest ways of instantly boosting your credit scores.

  • Two of the most important factors in qualifying for a home loan is credit scores and debt to income ratios
  • Both factors are extremely important when determining qualification of borrowers
  • But if you had to choose between which factor is more important, qualified income would be more important
  • Consumers can have the highest and most perfect credit scores and credit possible
  • But if they do not have qualified income, they cannot qualify for a home loan
  • However, as long as consumers can have qualified income but low credit scores and prior bad credit, credit scores can be boosted by using simple tricks of the trade
  • Prior bad credit is not a disqualification to get a mortgage loan approval, especially with FHA Loans
  • FHA has one of the most lenient credit criteria requirements to qualify for home loan

FHA Guidelines On Home Purchases

To qualify for a 3.5% down payment home purchase FHA Loan, borrowers need is a 580 FICO credit score.

  • FHA Home Buyers with credit scores between 500 FICO and 579 FICO can qualify for a FHA Loan with 10% down payment
  • FHA does not require borrowers with outstanding collection accounts to have their outstanding unpaid collection accounts to have them paid off in order for them to qualify for FHA Loans
  • However, credit scores does play a major role with FHA Loans
  • When it comes to meet the minimum 3.5% down payment requirement where in order to qualify for a 3.5% down payment FHA Loan, borrower needs to have a 580 credit score
  • Credit Scores also does play a major role when it comes to debt to income ratios with FHA Loans
  • Any borrower with credit scores under 620 FICO , FHA requires that the borrower’s debt to income ratios cannot exceed 43% DTI
  • Any FHA borrowers with credit scores of 620 FICO or greater, the debt to income ratio caps increases to up to 46.9% front end and 56.9% back end DTI to get an approve/eligible per AUS

Fannie Mae And Freddie Mac Guidelines On Conforming Loans

With Conventional Loans, the minimum credit score required to qualify for Conventional Loans is 620 FICO.

  • With Conventional Loans, credit scores play a major impact in getting the best conventional mortgage rates unlike FHA insured mortgage loans
  • With FHA Loans, as long as borrower has credit scores of 640 or higher, the will get the best FHA mortgage rates
  • This is because all FHA Loans is insured by the Federal Housing Administration against borrower default
  • If a homeowner with a FHA Loan default on his or her mortgage, FHA will insure the FHA Loan as long as the lender has followed HUD Underwriting Guidelines
  • So the risk level for the lender is minimized
  • With a Conventional Loan, the private mortgage insurance company is the mortgage insurance company insuring the Conventional Loan
  • The Conventional Mortgage Lender has risk factors they take
  • This is because the government does not insure the conventional loan
  • Risk versus rewards is the name of the game
  • Lenders view that the lower credit score borrower will have a higher risk of defaulting on their loan
  • Due to this fact, they will give a lower credit score borrower a higher mortgage rate

Loan To Value Guidelines

Loan To Value, also known as LTV, does not matter with FHA Loans:

  • This is because FHA Loans are insured by HUD against default to FHA mortgage lenders
  • The amount of down payment a home buyer puts down on a home purchase dictates the skin of the game the borrower has on a home purchase and the risk factor lender has
  • The larger the down payment, the less risk the mortgage lender has the lower the mortgage rates the borrower will get
  • With conventional loans, rates are dictated by the borrowers credit scores and the amount of down payment of the home buyer

Improving Credit Scores With Low Credit Card Balances To Qualify For Home Loan

There are several quick fixes to boost credit scores to qualify for a home loan.

  • Improving credit scores with low credit card balances is the by the easiest and fastest way of boosting credit scores to qualify for a home loan
  • A maxed out credit card will plummet credit scores
  • However, the lower credit scores due to a high balance credit card is just temporary and by paying down credit cards, you can instantly boost your credit scores
  • Those with multiple maxed out credit card balances can easily boost their credit scores by 100 FICO points of more by paying down all of their credit card balances
  • Conventional loans are credit score driven where the higher a borrower’s credit scores are, the lower their mortgage rates are
  • If you are a conventional mortgage loan borrower with maxed out credit cards, you should seriously consider paying down your maxed out credit cards before applying for a conventional loan to get the best available conventional mortgage rates

For those home buyers who do not meet the minimum credit score requirements to qualify for a home loan due to their low credit scores, they need to evaluate their credit card balances and see if they have maxed out credit cards. Paying down those maximized credit card balances will definitely boost their credit scores.

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