Mortgage Options For Homebuyers in Idaho With Bad Credit

In this article, we will cover and discuss mortgage options for homebuyers in Idaho with bad credit and lower credit scores. Many homebuyers in Idaho, especially first-time home buyers, do not realize that they can qualify for a home loan with bad credit. FHA loans are the best mortgage options for homebuyers in Idaho with bad credit.

VA Loans For Active and Retired Veterans in Idaho With COE

The next mortgage options for homebuyers in Idaho with less than perfect credit are VA loans. However, only eligible active and/or retired members of the United States Armed Services can qualify for VA loans. VA loans do not have a minimum credit score requirement.  Gustan Cho Associates offers mortgage options for homebuyers in Idaho with bad credit and under 600 credit scores making the American dream of homeownership a reality. Not all lenders have the same mortgage options for homebuyers in Idaho with lower credit scores and bad credit.

Mortgage Options For Homebuyers in Idaho on Government and Conforming Loans

Government mortgage options for homebuyers in Idaho are FHA, VA, and USDA loans. Conventional loans have higher credit requirements than government loans.

There are two types of mortgage guidelines:

Agency Mortgage Guidelines:

  • Agency guidelines are minimum mortgage guidelines set by FHA, VA, USDA, Fannie Mae, Freddie Mac

Overlays:

  • Overlays are additional guidelines set by individual lenders that are above and beyond those of agency guidelines

Gustan Cho Associates Mortgage has no overlays on government and conventional loans. In this article, we will discuss and cover mortgage options for homebuyers in Idaho with bad credit and low credit scores.

Mortgage Options For Homebuyers in Idaho With 580 FICO on Government Loans

Many potential home buyers are not aware of the major mortgage industry overhaul and new mortgage regulations after the 2008 Real Estate and Mortgage Meltdown that the government has created and implemented. New laws and regulations made home buyers eligible to qualify for a home loan with bad credit. Although many banks and lenders have minimum credit score requirements of 620 to 640 due to overlays to qualify for a mortgage, other lenders, like myself, can qualify borrowers with credit scores under 620. Lender overlays are mortgage guidelines that are above and beyond minimum Agency Guidelines. Gustan Cho Associates has overlays on FHA, VA, USDA, and Conventional Loans. The minimum credit score required for a 3.5% down payment FHA home loan is 580 credit score. Homebuyers with under 580 credit scores can also qualify for an FHA home loan. However, anyone with a credit score of under 580 needs a 10% down payment per HUD Guidelines.

Mortgage Options For Homebuyers in Idaho With Under 620 Credit Scores

Mortgage Options For Homebuyers in Idaho With Under 620 Credit Scores

There are various types of home loan programs.

  • FHA
  • VA
  • USDA
  • Conventional Mortgages
  • Non-QM Loans
  • Bank Statement Loans For Self Employed Borrowers
  • Jumbo Loans
  • Portfolio Loans

Mortgage Options For Homebuyers in Idaho With 580 Credit Score

FHA, VA, and non-QM mortgage options for homebuyers in Idaho make homeownership possible for borrowers with lower credit scores. The only solid mortgage loan program Idaho homebuyers can qualify for with credit scores under 620 and low down payment are FHA and VA loans. The Federal Housing Administration allows credit scores as low as 580 for a 3.5% down payment home purchase FHA loan. Borrowers with under 580 credit scores and down to 500 FICO can qualify for FHA loans with a 10% down payment. Prior bad credit is acceptable and older collections do not have to be paid off in order to qualify for an FHA loan. Charge offs and medical collections do not count.

Mortgage Rates For Lower Credit Scores Borrowers

Mortgage rates for borrowers with credit scores under 620 are higher. Debt to income ratio for borrowers with credit scores under 620 is normally lower. The lower the credit score, the automated underwriting system considers the borrower has more risk. Normally the debt to income ratio will get capped at 43% to get an approve/eligible per Automated Underwriting System Approval. Debt to income ratio for borrowers with credit scores of higher than 620 is 56.9% back end and 46.9% front end to get an AUS APPROVAL. Verification of Rent may be required for consumers with credit scores of under 620 if the Automated Underwriting System requires it.

Conforming Mortgage Options For Homebuyers in Idaho

Conforming Mortgage Options For Homebuyers in Idaho

With conventional loan programs, the minimum credit score requirement is 620. USDA loans normally require a 580 credit score however most lenders have credit overlays on USDA Loans. VA Loans depend on what the Automated Underwriting System states. Normally, with VA Loans, most lenders want a 620 credit score or higher. Department Of Veterans Affairs does not have any minimum credit score requirements for VA Home Loans. There is no debt to income ratio caps on VA Loans. Gustan Cho Associates has no overlays on VA Loans.

Mortgage Options For Homebuyers in Idaho With Under 600 FICO

Generally, credit and credit scores will affect mortgage rates. The lower borrower’s credit scores are, the higher the risk lenders view of borrowers. The higher the risk, the higher the mortgage rates. The higher the risk, the lender will scrutinize the mortgage loan applicant, even more, to make sure of the ability to repay. The ability to repay the mortgage loan and not default on their credit obligations and not be late on their mortgage loan payments is a concern all lenders have. Job stability is looked at. Compensating factors such as longevity on the job, reserves, debt to income ratios, verification of rent, and payment shock are factors mortgage underwriters will examine carefully.

Mortgage Options For Homebuyers in Idaho With Outstanding Collections

Everyone goes through tough times. Loss of employment means disruption in income, which means most folks cannot make their monthly debt payments. FHA loans are the best mortgage options for homebuyers in Idaho with bad credit to get qualified and approved. HUD has lenient mortgage guidelines for borrowers who have had prior bad credit and have lower credit scores in the recent past due to extenuating circumstances. Borrowers should have re-established their credit and had no late payments in the past 12 months. Mortgage Underwriters will not just look at the borrower’s credit scores but will also carefully review the overall credit history and payment history. Underwriters will want to know the reason why borrowers had a period of bad credit. Mortgage Underwriters may want a detailed letter of explanation as to the circumstances.

Common Reasons Why Consumers Go Through Period Of Bad Credit

Common Reasons Why Consumers Go Through Period Of Bad Credit

Some legitimate reasons and extenuating circumstances may be due to the following:

  • loss of job
  • loss of business
  • divorce
  • medical reasons
  • illness

Lenders Will Want To Know Reason For Bad Credit

If borrowers had total disregard for credit such as not paying their bills even when they could have afforded it and had employment but disregard credit, they will have a hard time qualifying for a mortgage. Lenders do not want to see borrowers who have been constantly late in their monthly debt obligations in the past 12 months. There is no way they will qualify for a mortgage loan if borrowers have had multiple late payments in the past 12 months.

FHA Loans is the Best Mortgage Options For Homebuyers in Idaho With Bad Credit

Lenders do understand that people do go through financial hardship and due to the extenuating circumstances such as loss of a job, their income stops and that is why they cannot pay their bills. However, they want them to recoup and reestablish their credit and start making good on their payments. How a person has paid their monthly debt obligations is a great indicator of how they will pay their future bills, especially their new mortgage payments. Having outstanding collections and charged-off accounts in the past is fine. But re-established credit is required to qualify for any type of mortgage program.

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