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Most people are aware that it requires a certain level of credit to qualify
for a home loan to refinance or purchase. Recently, we have had several
people come in who thought their credit was marginal at best. Their goal
was to learn how long it might be, and what they would have to do before
they could buy a home. Upon investigation, we found that their credit
was not as bad as they had thought, and/or there were perfectly good explanations
for whatever credit problems that existed.
Low credit scores alone will not necessarily stop someone from buying
a home. More important is, what caused the low scores and why. Credit
scores can affect which loan programs are available but there are programs
available for nearly every credit level. Some of these programs, although
less desirable than a VA or FHA, can be used as a temporary measure to
help a person stop renting and start owning their own home. The fact that
the interest rate is a little higher may be offset by the tax benefits
and potential increase in value of the home. After a year or two of good
track record, it is often possible to refinance into the best available
30 year fixed rate mortgage.
Credit is only one of the 5 major issues of mortgage underwriting. The
other 4 are - down payment, job history, qualifying ratios, and reserves.
Underwriting, or loan approval, is as much art as it is science. Real
strength in the above mentioned categories can help to enhance or shore
up credit scores. Most people are unaware of and do not structure their
life according to VA or FHA or any other institutional guidelines. Every
person and every family has a different set of circumstances and must
be considered as individuals on a case by case basis.
Often, credit problems can be explained because they were caused by
circumstances out of the control of the borrowers. Sometimes, there are
steps that can be taken that will immediately improve credit scores.
Owning your own home sure beats paying rent so even if the credit problems
are severe, we try to help people make a plan that will get them in a
position to buy their own home as soon as possible.
Compliments of CenCal Mortgage - 805/238-5626
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