In my days as a realtor, I remember a time when anyone with a pulse could get a home mortgage. Regardless of credit history – regardless of work history or income – a buyer didn’t even have to have a down payment. There was a lender out there that would loan that buyer the money to buy a home. In the last couple of years, those loose standards have taken a toll. You know what I’m talking about-foreclosures. Our struggling economy can be directly linked to the loans that lenders should not have approved over the last decade. It is human nature to overcompensate for mistakes, so now lenders are getting pretty strict with their qualifications for borrowers.
Nowadays, prospective borrowers must provide proof of income, adequate credit scores, and even show that they have funds for a decent down payment. And 100% financing is getting harder and harder to find.
If your credit score is below 640, it will not be easy for you to get a home loan-not impossible, though. But even if you have a great credit score, you will still have to provide proof of income and proof of funds for a down payment to gain loan approval.
It is not a waste of time to contact a mortgage broker if your credit score is on the low side. There are loan programs out there for you. Be patient, though. You may have to work on your credit for a while before you can qualify for a mortgage loan.
Keep track of your progress along they way by tracking your credit. You can obtain your credit report yourself. The three credit bureaus that keep your credit history on file are Experian, Equifax, and TransUnion.
If you have over-due bills, you should clear them up before applying for a mortgage. Look at things from the lenders’ point of view. It wouldn’t make good business sense for them to loan money to someone who is already in over their heads. If you are behind on your bills, it is for one simple reason. You are spending more money than you make.
There are folks who end up in financial trouble through misfortune like illness, debilitating accidents, divorce. These are problems that are no one’s fault. But many of us have money troubles because we have undisciplined spending habits. The road to good credit starts with a budget.
A few years back my husband’s pay was cut drastically and insurance benefits were decreased. We explained the situation to our kids and let them know that we were all going to have to make sacrifices. Families have to do that sometimes. That meant no Disney channel, no cell phones, no gym membership, no eating out.
The point of this story is simple: We had to live within our means.. Getting your spending under control is the only way to improve your credit score. So know your credit score, work to raise it, and check it regularly (at least twice a year).
