Preparing Mortgage First Time Home Buyers Guidelines

This BLOG On Preparing Mortgage First Time Home Buyers Guidelines

There are certain ways for first time home buyers to get prepared when it comes to the home buying process.

  • Buyers intending on purchasing a new home in the near future should start consulting with a mortgage lender
  • They should see whether they qualify for a mortgage
  • They should see what  loan amount they qualify for
  • As long as borrowers have proof of income, they will qualify as long as they meet minimum agency guidelines

Gustan Cho Associates has no overlays on government and conventional loans.

Credit Scores

Credit Scores

Consumers can get a copy of their credit report and see where they stand and what their credit scores are.

  • However, before starting repairing credit or buy any high ticket item such as a new car, I strongly recommend borrowers to consult with a lender
  • Mortgage brokers do not charge anything
  • They can pull credit at no cost
  • The loan officer can give borrowers a copy of  credit report
  • They can advise borrowers on what to do to improve credit scores in the event if they do not qualify for a residential mortgage loan
  • A mortgage broker can also tell borrowers what the maximum amount of mortgage loan they qualify for
  • Loan officers can advise the minimum down payment and closing costs needed
  • They will give borrowers estimated closing costs will be on a home purchase transaction

Credit Report

Once buyers consult with a mortgage broker, the loan officer will run credit and review the credit report.

  • Loan officers will go over credit report with borrowers to see if all of the information on the credit report is correct
  • If there are errors on credit report, the loan officer will advise on ways to correct them by rapid rescoring with the three major credit reporting agencies or by contacting the creditor directly
  • Borrowers with prior bad credit and/or with no credit, a loan officer might advise getting several secure credit cards
  • Secured credit cards are used to boost credit scores
  • It is also used to add positive credit to credit report and start to develop credit tradelines

Credit Tradelines

Many mortgage lenders require three to four credit tradelines.

  • A credit tradeline is a credit history with at least a 12-month seasoning
  • Consumers can also use non-traditional tradelines in lieu of traditional tradelines

Non-traditional tradelines are creditors like the following:

  • cell phone carriers
  • insurance companies
  • landlords
  • electric companies
  • gas companies
  • water companies
  • other creditors that traditionally does not report payment history to the three major credit reporting agencies

Preparing Mortgage First Time Home Buyers With Recent Late Payments

Preparing Mortgage First Time Home Buyers With Recent Late Payments

Borrowers with recent late payments may have problems qualifying for a residential mortgage loan.

  • Borrowers can have prior bad credit as well as open collections and older late payments and derogatory credit
  • However, most lenders want to see timely payment history in the past 12 months
  • Multiple recent late payments will be a problem
  • Credit scores will definitely suffer as well
  • First time home buyers with multiple recent late payments may need to way six or more months before they apply for a residential mortgage loan
  • First time home buyers with recent multiple late payments on their credit report may want to add positive credit
  • Adding three to five secured credit cards to offset the negative derogatory credit

All these tips, the mortgage loan originator can advise borrowers.

Preparing Mortgage First Time Home Buyers With Low Credit Scores

Besides credit reports and payment history, consumer credit scores are also equally as important.

  • Credit scores will be determinant on what type of mortgage borrowers will qualify
  • For example, to qualify for a 3.5% down payment home purchase FHA Loans, the minimum credit score borrower needs is 580 FICO
  • To qualify for a conventional loan, the minimum credit score borrowers needs is 620 FICO

Preparing Mortgage First Time Home Buyers And Down Payment Requirements

First time home buyers who want to buy a home with a 3.5% down payment but do not have a 580 FICO, they need to first work on getting their credit scores to 580 or higher in order to qualify.

  • Raising a person’s credit score is possible but the key question is the timing
  • Depending on how poor the credit score is, it may take some time in order to improve the first time home buyers credit scores
  • There are quick fixes for boosting credit scores such as paying down credit card balances

Preparing Mortgage First Time Home Buyers With No Credit Scores

Mortgage First Time Home Buyers With No Credit Scores

Borrowers with no credit with old bad credit can easily boost their credit scores by getting a few secured credit cards.

  • Some folks in these situations can easily boost their credit score by 100 or more points by getting three to five secured credit cards
  • Others who have credit scores under 500 due to too many derogatory credit items may need to enroll in a professional credit repair program
  • Credit repair programs are useless if consumers are trying to remove recent derogatory credit tradelines

By recent, I mean that any recent derogatory credit items that are newer than 6 months old will not be effective by disputing the creditor. This holds true if it is valid because creditors will have records readily available.

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