Bad Credit? Qualify Yourself For A Zero Down
Mortgage Loan
by Nick Graziano
I decided to write this article today after
closing a home purchase loan for a couple that had some major credit issues.
They got into the house with ZERO down payment, and only had to bring $600 for
the closing costs. Their situation was pretty bad, I’m talking about a
bankruptcy 2 years ago, thousands of dollars in outstanding collections,
charge-offs and debt to income ratio of 49%. By the way, we left all of their
outstanding charge-offs and collections open which means they didn’t have to
pay any of them off! So many think they won't be able to qualify for a mortgage
loan. Many will keep thinking they can't qualify until they read this article.
My name is Nick Graziano and I have been employed as a Loan Officer for 5 years.
I have experience originating conventional mortgage loans as well as sub-prime
(non-conventional) residential mortgage loans. Many of the clients that I deal
with have great credit (and know it) and have no problem getting a loan but then
there are those with credit problems (and they know it too). The ones with great
credit are the ones that are easy to close, get the best rates and all with
minimal time involved on the part of myself.
But, this article is for those with credit problems, low income and those who
cannot afford a down payment. I am going to show you how to qualify for a loan
with ZERO down payment, and the only out of pocket expense will be less than
$1,000 ( if any at all) to cover some of the closing costs. This is just an
example of one particular loan program that I use but there are numerous others
out there. I picked this loan program because it allows 100% financing down to a
575 credit score
I see it on a daily basis.
Everyone wants to own a home and those with credit problems are calling every
mortgage company in the phone book and applying on every mortgage website out
there. (And there are many out there). Only to find out later that every time a
mortgage company pulls their credit, their credit score dropped a few points, or
that the particular lender doesn’t originate the type of loan that you need.
That is frustrating.
Step by Step
Here is where I show you how to qualify yourself for a zero down loan.
1.The first thing you need is your tri-merge credit score. I would be more that
happy to suggest a few places on the internet that you could go to get your
credit score but I don’t want this article to seem like an advertisement. So,
the best thing to do is to do a search on yahoo.com for terms like “free
credit reports”, or “tri-merge credit report”. Just make sure that you end
up pulling a “tri-merge” credit report on yourself. A tri-merged credit
report pulls your credit profiles from the 3 major credit reporting companies
and merges it into 1 report. The nice thing about pulling your credit yourself
is that it will NOT affect your credit score. Bookmark this page while you go
get a copy of your credit report and then come back to see the additional steps.
2.What is your credit score? Most mortgage lenders will use the middle of the
three scores. Example: Your credit scores are 576, 525, 599. In this case you
would use the 576 credit score since it is not the lowest score and it is not
the highest.
3.Is your middle credit score at least 575? If so, congratulations and move on
to the next step. If your middle score is less than 575 you have some homework
to do. You can either sign up with a credit repair company (“search yahoo.com
for credit repair”) to try and remove some derogatory items on your credit
which will raise your credit score OR you can try to acquire some credit to help
re-establish your credit worthiness. The easiest way to re-establish your credit
is by either getting a car loan or credit card designed to help re-establish
your credit. Again search yahoo.com for “credit cards to re-establish
credit”
4.Do you have a bankruptcy or foreclosure in your past? Has it been 2 years
since it was discharged? If yes, move on to the next step! If not, unfortunately
in most cases your bankruptcy or foreclosure will need to be discharged at least
2 years or you will need to have at least 5% down payment.
5.You will need to document 24 months of recent mortgage or rental history. If
you rent from a property management company we will need a Verification Of Rent
completed. The form will be supplied by your mortgage lender or broker. If you
rent from a private landlord, you will need 24 months cancelled checks/ or money
order receipts with no payments over 30 days late. Sorry, you cannot prove your
rental history if you pay your landlord cash every month, unless they are a
property management company. If you are unable to document your rental history
there is a way around it. Get your credit report and look for the following: Do
you have an active credit line on your credit report that has been open for at
least 24 months? Has this credit line had any activity in the last 6 months? If
so, move to the next step.
6.Look at your credit report. Do you have a credit line that has a 12 month
history reporting? If so and as long as you have no more that 2x30 day late
payments then move on to the next step.
7.Look at your credit report again. Do any of your credit lines have a high
limit of at least $3,000. If so, move to the next step.
8.Now take one more look at your credit report. You will need 1 more additional
open credit line reporting on your credit report. (It does not matter how long
it has been open or how much the credit line is for).
Well, congrats! You made it this far which means that your credit might qualify
for a Zero Down Payment Loan. The loan program you qualified for is subject to
change and is subject to additional conditions. This article should not be
construed as an advertisement to lend. These are the steps that I go through
when trying to pre-qualify a client that has credit problems. There are many
more factors to determine so please discuss this with a qualified mortgage
professional.
You are probably asking yourself what you are supposed to do with the
information that was given to you in this article. The first thing is to contact
a few mortgage companies. Ask them if they have any zero down loan programs that
will go down to a 575 credit score, or whatever your credit score is. Remember,
you will need at least a 575 credit score to qualify for this particular loan
program. Also, in order to minimize your out of pocket expense, ask your
mortgage professional if the property seller is allowed to pay 6% of the
purchase price towards closing costs. If so, you will need to remember to
negotiate that into your purchase contract when you make an offer on a house.
About the Author:
Nick Graziano
http://www.aaamortgagerate.com
http://www.mymortgagespecialist.net
info@aaamortgagerate.com
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