- U.S. Federal Housing Administration loans are not credit score driven. In other words, people can get home loans, regardless of their current credit score. However, if a consumer has had bad credit, he cannot get a loan if he has late payments or trade lines put into collection within the past 12 months.
- Money still "talks." A consumer with poor credit who can put down 25 to 50 percent of the purchase cost will tremendously increase his chances for a home loan approval.
- For consumers with less than perfect credit, adding a credit-qualified applicant to a home loan can mean the difference between an approval and denial. Co-borrowers are commonly used on FHA government-backed loans. The co-borrower must be related to the primary borrower by blood or marriage.
- Individuals who have suffered with bad credit can use a home loan to turn it around. Having that stable, reported account on a credit history can improve scores faster than other, alternative lines of credit.
- Often the cost of having bad credit will be felt in the requirement to pay higher interest rates than borrowers with a solid credit history. Bad credit mortgage applicants can often expect to pay annual interest rates as much as 1 to 3 percent higher than their credit-worthy counterparts.
- Many consumers feel that being denied a home loan means they can never qualify. This is where communication with a loan officer is key. If no other resource is available for a home loan, a good loan officer can provide you with a detailed plan on improving and increasing your credit score over time. In some cases, consumers with poor credit can become part of a credit improvement program and increase their score substantially in less than 90 days.
- To get the best deal and best rates, order a copy of your credit report prior to applying for a loan. Check for errors, even if your credit is less than perfect, and dispute any you may find. Knowing what your credit report says is half of the battle in obtaining a loan approval.
