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As a consumer, is your credit bad enough to deserve the worst scenario? -- Part 1

How many of you fear that your credit score is just not good enough? What about when a lender tells you that you only fit a particular loan product just because of your credit score, no matter how much money you make? Can all of this be true? Not necessarily!!! Why can I say this when so many of the lenders might tell you, the consumer, differently.

There is one loan product out there called FHA. And not every lender is either approved to offer this or are many loan officers aware of this program and what can be done with it. Bottom line, FHA does not require specific credit scores, but they do look at your overall credit history. More so, the last 12 months of a credit history are looked at and good explanations will supersede any blemishes on you your credit report. But this sometimes can take elbow grease from the lender that you are working with. A good team, which would consist of the loan officer and the underwriter, that try to make the deal work and not just give up because of your credit scores.

I once was able to get a client a 2.25% down payment mortgage at a 6.5% 30 year fixed rate with a 569 credit score. This took place in June of '06, mainly because I was able to show 2 good tradelines currently on the credit report and 2 non-traditional tradelines with a 1 year payment history. What is a non-traditional tradeline? They don't appear on your credit report and might consist of utility bills, cable bills, and even your car insurance bills. Most lenders with that credit score would want any where from 5% to 10% down and most rates would be around the high 7's to mid 8's.

credit reports

Beware of those ads telling you that your credit report can be free. How many times has someone mentioned that nothing is ever free. George Souto did a blog about first time homebuyer's in regards to information on credit reports. 1st Time Homebuyers.........What You Need To Do First!!! Please go to his section titled Opt Out . This is just not for first time homebuyers, but is for anyone whole has their credit pulled. But more so when having it pulled from a specific lender. If you don't follow what George talks about, you have a high chance of getting calls from other lenders. And always read the fine print of any disclosures online, just to be on the safe side.

Overall, just don't assume the worst if you apply with a lender and they haven't gotten back to you within 2 to 7 days. It might be for the fact that you are working with either an inexperienced loan officer who just knows the basic types of programs or one that doesn't want to work hard on a semi-difficult scenario.

Here is a link on some information on credit and credit scores : Basics on Credit Reports and Credit Scores

Jeff Belonger with over 14 years of lending experience will work on any scenario at any time. Please never hesitate to contact me 7 days a week. I have closed many loans that have been turned down by several lenders, just because of my experience and knowledge of the mortgage industry. jbelonger@ihmci.com

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For more information on FHA loans, please go to this link. The FHA Expert You can also go to this group : The FHA Mortgage Group

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 02/04/2007 03:02 PM

Comments (8)

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8 Comments on As a consumer, is your credit bad enough to deserve the worst scenario? -- Part 1

FEB

2007

Jeff, Good post. My book of business was at a 95% level of nothing but Government loans. This occurred in 1996. There are so many ways to sell an FHA loan. It is a great product, backed by our government, and if the borrower does meet up with some hard times after purchasing their home, Hud has several options to keep the homeowner in their home, which could avoid foreclosure. Take care, Bob

I work with George at McCue Mortgage. We have never shied away from FHA loans. I agree that FHA can help lots of people that might have ended up with a sub-prime loan or Alt-A. With the changes that FHA made from the appraisal standpoint in January, 2006 life has become even easier for Realtors and prospecticve homebuyers and sellers.

It is great to see you that think the same as George and me.

Bob...... I have been doing FHA loans since 1993. I agree, it is a great program and because so many new loan officers got into the business in the last 5 years, I can't tell you how many don't even know how FHA works. It's kind of sad, but not 100% their fault. It comes down to the lender that they work for and if they hold classes for them to learn all the ins and outs. thanks for stopping by and for your feedback.

Philip.... I know you work with George at McCue. I can't tell you how many borrowers that I have helped that were originally approved sub prime. And yes, it has helped a lot since HUD reduced the appraisal requirements for all lenders when it came to the basics of house. Hence the reason why consumers should still get home inspections. Sure, there are the fannie mae commuity homebuyers program, but FHA can be more lenient in many cases. Besides, FHA has approved the 100% financing...well, agreed to it. But it's still in it's reform stage. I hope it gets finished sometime in 2007.

Overall, thanks for stopping by and for your input.

FEB

2007

Jeff, I agree with what you have stated about FHA. As Phil also stated FHA loans can be done in cases where some might just go right to a subprime loan, and not even look at FHA with a much better rate, and no pre-paid penalty. The reason why some Loan Officers might do this is because some think that it is a pain in the butt loan to do, but if you know what you are doing it is easy.

It all seems to come down to whether the Loan Officer is truly interested in doing what is best for his/her borrower or themselves.

FEB

2007

I always start my Sub-Prime folks with an FHA - better pricing for both of us!! Great Post.

FEB

2007

George..... I guess what makes you and I different from so many loan officers is that we don't consider it a pain in the butt, but just understanding how each program works. Putting your fears aside and letting go...learning about the different types of programs out there... with the end result, helping out your client, but most of all.....making sure they get that best deal and not based on what you just know.

Brian....... I agree.... and sometimes I get caught up in the sub prime, because it's just there. Just looking at the credit score, which is not always the true indicator for FHA mortgages.

I am dealing with one now..... his scores are in the mid 400's..... but no matter what the score is in 4 to 6 months, I will have a great shot at taking it FHA..... even if his score turns out to be a 500. In the sub prime world, the best that gets him is a 20% down mortgage. With FHA, I will be able to do a 2 1/4 % down mortgage.

Thanks for the compliment.

MAY

2008

I help a lot of Loan Officers that are hurting from the sub prime tighting. Good info

a lot of people look at the income guidelines as stringent. who's right now that the market has turned? i'm going to suggest fha as a viable outlet more often.

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