Is 640 the Minimum Credit Score For a Home Mortgage Loan?
"What is the minimum credit score I can have and still get a loan?.. "
"What is your credit score...do you know?.. "
What's the Minimum Credit Score For a Home Mortgage Loan?
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 need 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.
I'm talking about.....FORECLOSURES!! and a Mortgage Credit Crisis.
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 to the lender that they have sufficient income to afford the payments.
Lenders are also more concerned about credit scores. And it is near impossible to find a lender that offers 100% financing. In other words, home buyers must have some money for a down payment.
Mortgage Loan with a low Credit Score
So Again...What's the Minimum Credit Score For a Home Mortgage Loan?
Is it 640?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 sufficient income to afford the monthly payments.
It is worthwhile to contact a mortgage broker even if your credit score is less than 640. There are loan programs out there for you. Be patient with yourself, though. You may have to work on your credit for a few months before you can qualify for a mortgage loan. In order to keep track of your progress along they way, you need to stay informed about your credit on a regular basis.
Get a copy of your Credit Report
You can obtain your credit report yourself. There are three credit bureaus that keep your credit history on file. They are Experian, Equifax, and TransUnion.
If you have over-due bills, now is not the time for you to apply for a home loan. Thinking from the perspective of the lenders, why would they loan money to someone who is already struggling to pay their bills. If you are behind on your bills, it is time to practice some mature decision-making. I've heard it called, "putting on your big boy pants." Look at your monthly income. Add up all the bills you have to pay out each month. If you are coming up short, you have to make some big boy decisions.
Budgeting, Cutbacks, and Living Within Your Means
My husband works for a major airline (no, he's not a pilot). A few years back, his pay was cut drastically and insurance benefits were decreased. Suddenly we had A LOT less income. At the time, I was a stay-at-home mom. If we had continued to try and live at the same level of lifestyle, we would have gotten behind on our bills. We stood to lose the good credit it took us decades to build. On went the big boy pants. We cut back everywhere. We cut out cell phones, cable TV, cut out our gym membership, downgraded our car insurance from full coverage to minimum coverage, got cheaper home owner's insurance. We even sold one of our cars to get rid of the monthly payment. To spend less on groceries, we ate sandwiches once a week for dinner. We even had "cereal night" once a week. No one complained too much about sandwich night and cereal night, but my daughter was crushed to have to say good-bye to the Disney channel. And my teenage son grieved the loss of his cell phone. Times were tough, but we got through it. 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. The point of this story is simple: Live within your means. If you do not keep track of how much you are spending each month, you will eventually over spend. 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).Reviewing your credit regularly will make errors easier to find. If you find errors, report them to the credit bureau(s). Read it over carefully and if you see any errors, request corrections from the credit reporting company.
Errors are not that uncommon, so don't feel weird about having to report them.
If you need to improve your credit, you can give your rating a boost by using a secure credit card. A secure credit card works almost exactly like a debit card. You deposit money into an account with the card company. The amount of the deposit represents your spending limit. If you try to spend more than your limit, your card will be declined because, hello, the money is gone.
The best way to use a secure credit card is to keep your spending way below the limit. The recommended amount is 30% or less of your limit. If you have a limit of $1000 on your card, you should keep the balance at $330 or less. Paying your balance off every month will improve your credit within a few months. If you are one of the millions in our country with a bankruptcy on your credit, you should live as simply as possible for at least two years after your bankruptcy. I have some friends that went through it. The husband had a six figure engineering career. The wife was a pre-school teacher. Their spending was lavish. He is a techno-addict and a musician. She loves to decorate. Within a three month span, they both lost their jobs, could no longer afford their lifestyle, bah-duh-bing, bah-duh-boom, they had to file bankruptcy.
For the next two years, they lived in a SMALL rental house. During that time, they drove beater cars that they swear ran on prayer. They ate beans and rice, and rice and beans. They did NOT eat out. The hubby brown-bagged his lunch every day (usually left-over beans and rice). They kept in touch with the bankruptcy attorney, kept a check on their credit, paid their bills on time, and learned a lot about how little they could live on. It was sooooo tough, but they adopted a since of humor about it that got them through. After making these sacrifices (and many others) for two full years, they will be moving into their new home next month. They did it the right way. Well, they did things the wrong way for too long, went bankrupt, and then did it the right way. They are back on track. Their income is much less now than it was two years ago, but they have new spending habits, have learned some tough lessons, and will tell you that they are better people for having been through the tough times.
Bankruptcy, Charge-offs, and your Credit Score
Although bankruptcy is tough, "charge-off's" and accounts that have been handed over to collections are the kiss of death when it comes to your credit. The only way to get them taken off of your credit is to pay them in full. And even then, it is up to the creditor that you owe to delete it. You must take the initiative, call the creditor and work it out. Most creditors just want their money out of you, and will work with you if you are honest and if you do what you say you will do. But first, get it in writing from the creditor that they agree to delete the charge-off once the account is paid in full. Do that up-front, then start making the payments to them. If they don't delete it, the item will remain in your credit file. I have given real world examples of what it takes to keep good credit, and what it takes to build back damaged credit. Every situation is different. Some people are years away from qualifying for a mortgage loan, some are only a few months away, and some are ready right now. The best way to find out where you are is to know your credit score.
640 Credit Score
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If you have a score under 640, get in touch with a mortgage broker. He can guide you in a step by step process to raise your credit scores. Mortgage brokers know what lenders like to see in a borrowers credit file, and they are willing to work with you for as long as it takes to raise your credit score and make you a qualified borrower. Find out your credit score. You may be in better shape than you think.
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