How To Raise Credit Scores To Qualify For Home Loans

This BLOG On How To Raise Credit Scores To Qualify For Home Loans Was Written By Gustan Cho NMLS 873293 And UPDATED And PUBLISHED On March 1st, 2020

How To Raise Credit Scores To Qualify For Home Loans:

Credit Scores are extremely important when it comes to qualifying for mortgages. On this blog, we will discuss ways on How To Raise Credit Scores To Qualify For Home Loans. Lenders need to analyze the following when it comes to qualifying borrowers and issuing pre-approvals:

Mortgage Borrowers income: Qualified Income
Mortgage Borrowers credit scores: Need to meet minimum credit score requirements
Mortgage Borrowers credit report: Just because borrowers meet minimum credit scores does not mean they automatically qualify for home loans
Borrowers assets and liabilities

In this article, we will cover and discuss improving credit scores to qualify for a mortgage.

Minimum Credit Score Requirements To Qualify For Home Loans

Every loan program has minimum credit score requirements . There are times where borrowers may be short a few points in qualifying for a particular mortgage loan programs. Here are the minimum credit score requirements on mortgage loan programs:

FHA Loans: HUD, the parent of the Federal Housing Administration (FHA), requires a minimum credit score of 580 for 3.5% down payment home purchase FHA Loans
Borrowers with credit scores between 500 and 579 can qualify for FHA Loans
However, 10% down payment is required
Fannie Mae and Freddie Mac requires 620 credit scores to qualify for Conventional Loans
The Department of Veteran Affairs (VA) does not have a minimum credit score requirement with an approve/eligible per Automated Underwriting System Findings
However, it is rather difficult to get an approve/eligible per AUS Findings with credit scores under 580
USDA Loans normally require 640 credit scores to get an approve/eligible per GUS Findings
Most Jumbo Lenders require a 700 credit score to qualify for Jumbo Mortgage Loans

Second mortgage lenders such as banks will require a 700 credit score for HELOC and second mortgages.

How To Raise Credit Scores To Qualify For Home Loans

Gustan Cho Associates are lenders with no lender overlays on government and conventional loans.

Our business model among our licensed loan officers is never turning away a borrower
“You do not qualify, come back a year later” is what most other loan officers from other mortgage companies say
However, that statement is a Taboo in our team of mortgage professionals
The minute a mortgage borrower contacts us is the minute they become our client
It is not if they qualify for a home loan but when they qualify for a home loan
Over 75% of our borrowers are folks who got a last-minute mortgage loan denial by other lenders or are stressing during their mortgage process

We help all of our borrowers who do not quite meet the minimum credit score requirements to qualify for a home loan.

Tips On How To Raise Credit Scores To Qualify For Home Loans

Borrowers do not have to spend hundreds or thousands of dollars to a credit repair consultants to boost their credit to qualify for mortgage loans. Whatever a credit repair company can do, borrowers can do it themselves without spending a dime. Remember that credit disputes are not allowed during the mortgage process. Late payments, charge offs, collections, tax liens, judgments, and other negative items cannot be under credit disputes during the mortgage process.

Quick Fixes To Increase Credit Scores

Here are some basic tips borrowers can do to boost their credit scores:

Pay down credit cards to 10% balance versus credit limit
If the borrower is married and has a spouse with low credit card balances with perfect payment history then have spouse add a borrower to spouse’s credit card as an authorized user
However, the spouse’s credit cards need to have perfect timely payments and low credit card balances or it will backfire
Go to www.gustancho.com and click RESOURCES and click down to BOOST YOUR CREDIT WITH INSTANT CREDIT.
Follow instructions
You can get $5,000 unsecured jewelry revolving credit account by purchasing $100 worth of jewelry
This will increase credit scores
Buy your wife the jewelry and not your girlfriend. Lol
If you have current credit cards and payment history is perfect, contact them and see if they can get credit limit increase
The higher available credit on a credit card, the higher a consumer credit scores

Doing one or a combination of the above will definitely raise credit scores.

Case Scenario In Raising Credit Scores

For example, paying down one maxed out credit cards can easily boost credit scores by 40 or more points. For those who have no revolving credit, getting a secured credit card with a $500 credit limit can easily raise credit scores by 30 or more points. Adding yourself to a spouse’s credit card as an authorized user can easily raise credit scores by 30 points.

However, we want to increase borrowers credit scores much as possible to get them the best rate and an approve/eligible per Automated Underwriting System
Our borrowers will get approved so no worries
We want to boost mortgage borrowers credit scores as high as possible
We do just want to get our borrowers approved and closed but also to get them the lowest possible mortgage rates

The higher a mortgage borrower’s credit scores, the lower their mortgage interest rates.

Credit Disputes During Mortgage Process

Many home buyers think that hiring a credit repair company will help them raise their credit scores and help them qualify for mortgage loans. Unfortunately, credit repair prior to the mortgage process can backfire in qualifying for mortgage loans and this is why:

Credit Disputes are not allowed during mortgage process
Reason being is that once a consumer does a credit dispute on a derogatory credit item, the credit bureaus will automatically discount the disputed item from the credit scoring model
What this means is if the verbiage “Consumer Disputes This Credit Item” is stated, that negative item is automatically deleted from the credit scoring formula
So the consumer credit scores will go up because that derogatory item is non-existent on the credit scoring formula

This is the reason why credit disputes are not permitted during mortgage process.

Credit Disputes Exempted From Disputes During Mortgage Process

There are certain credit disputes that are exempted from credit disputes during mortgage process.

Medical Collections are exempt from credit disputes no matter how much the outstanding balances are
Non-Medical Collections with zero outstanding balances are exempted from credit disputes during mortgage process

Non-Medical Collections with an aggregate outstanding balance of under $1,000 outstanding balances are exempted during mortgage process.

How To Quickly Boost Credit Scores Overnight

One trick of the trade to raise credit scores is if borrowers have medical collections or non-medical collections with aggregate outstanding collection balances under $1,000, then do credit disputes on them and this will raise borrower’s credit scores. Need to be careful when using this strategy because once consumers do a credit dispute on medical collections, it will instantly raise credit score but once the dispute is resolved, it will drop the credit scores again. Timing is key to this strategy.

Dangers Of Hiring Credit Repair Companies During Mortgage Process

Many Loan Officers do not realize that credit repair companies can backfire on them. Credit repair companies can use certain techniques in deleting negative items and/or erroneous information off consumer credit reports. However, one thing that they need to realize is that expunging and/or deleting public records does not work.

Credit Fixes That Work Versus Not Work

Here are things that work and things that do not work:

Late payments can be deleted and nobody can find out about it
Collection accounts and charged off accounts can be deleted and lenders cannot find out about it
Tax Liens and Judgments that are deleted will be discovered by lenders because all lenders will do a third party national public records search
Other public records such as bankruptcies, short sales, deed in lieu of foreclosures, and foreclosures that are deleted off credit reports will be discovered by the lender when they do a national public records search
Federal student loans, child support, alimony, and other public records not reporting on credit reports will be discovered when mortgage lenders do a third party public records national search

This BLOG On Raise Credit Score To Qualify For Mortgage Tips And Advice Was UPDATED On November 23rd, 2018

Most of us, at some time or another, have done something to adversely affect their credit rating, and many times did not realize of the negative impact.

One late payment reporting on credit bureaus can plummet one’s credit score by 50 FICO points or more
Other common mistakes made by consumers is when an annual credit card payment fee is due
The minimum $5 dollar payment for the month is not paid
The credit card company will report them as 30 days late
Any derogatory reported item on a credit report remains for seven years

In this article, we will cover and discuss how to Raise Credit Score To Qualify For Mortgage Tips And Advice.

Reasons For Late Payments On Consumer Credit Reports

Here are some examples and scenarios where consumer’s get bad credit:

Loss of job or periods of unemployment
Loss of business due to mismanagement and/or bad economy
Divorce

A person’s credit plays a key role in being able to qualify for a mortgage. Those with bad credit may need to improve and raise credit score to qualify for mortgage.

Raise Credit Score To Qualify For Mortgage And Get Pre-Approved

The first person a home buyer needs to consult with when starting the home buying process is a loan officer.

Without a pre-approval, most cannot shop for homes
Cannot submit a real estate purchase offer
The pre-approval letter is needed by a loan officer
In order for the loan officer to issue a solid pre-approval letter, the borrower needs to credit qualify
Borrowers need to meet minimum credit score requirements to qualify for a mortgage

Those who have lower scores may need to raise credit score to qualify for mortgage.

Credit Bureaus

There are three major credit reporting agencies:

Consumer credit scores range from 300 to 850. Lenders have minimum credit score requirements that borrowers need to meet. If borrowers do not quite qualify, there are ways on how to raise credit score to qualify for mortgage.

When you’re in the market to buy a home and discover that you have bad credit and your score is low, don’t despair. Although it may delay the purchase of your home, there are ways to repair your bad credit rating so that you may still qualify for a home mortgage with a decent interest rate.

To evaluate your credit rating you’ll need to obtain copies of your credit reports from the various agencies. Examine them carefully to see what transactions are lowering your score.

A note about bankruptcies: A bankruptcy can lower your credit score by 200 points or more. Repairing bad credit following a bankruptcy is beyond the scope of this article.

Charge-Offs: Charge-offs appear on your credit report if a creditor has given up trying to collect from you and ends up writing off the amount you owe as a bad debt. Charge-offs are one of the main reasons why loan applicants are denied credit.

How to Repair It: If you have any charge-offs, contact those creditors immediately and make arrangements to pay off the old debt. After a few months of regular payments, or if you repay a charge-off debt in full, submit a written request to that creditor to change the status on your credit reports.

Late Payments: Late payments may be handled differently depending on whether they are isolated incidents or recurring problems.

How to Repair It: If you have a single late payment listed on your credit report, the best thing to do is contact your creditors by phone to discuss the situation. Follow the conversation with a written request to have the isolated late payments removed from your reports. If you’re consistently late with payments, however, repairing the problem is a little more involved. You’ll need to begin by setting a pattern of paying on time over several months. Once this positive pattern is established, call your creditors (and follow-up in writing) and let them know that you’re back on track. With persistence and patience, you may be able to delete these score-lowering marks.

Reporting Mistakes: Sometimes, creditors just make mistakes when reporting to the bureaus. Such mistakes might include charge disputes that resulted in an initial late payment that was eventually reversed. Unfortunately, it’s the individual’s responsibility to spot – and repair – reporting mistakes that lead to bad credit.

How to Repair It: Once again, contact your creditor by phone and follow up with a written request that the mistake be corrected. Because the Fair Credit Reporting Act (FCRA) requires that credit agencies and their information providers investigate reports of inaccuracies, you’ll also want to contact the CRA directly to report the discrepancy.