Many people are struggling to raise their FICO score to meet mortgage qualifications. A forgotten payment, high balances, a prior foreclosure, short sale or bankruptcy can wreck havoc with your score.
Banks have been unforgiving about past transgressions. Qualifying for a mortgage has been pretty tough the last couple of years. FHA allows borrowers to have a credit score of 580 or above. The banks are the ones who have been more stringent and unyielding. Most banks have not considered folks for a mortgage if their score is less than 620.
It's a struggle to repair credit and get scores moving upward. It seems no matter how hard you try to pay down debt that pesky score just does not move. The FiCO score can prevent you from attaining the dream of home ownership.
To make matters more stressful are the waiting periods. If you had a past foreclosure the waiting period can be from 2 years to 7 years depending on the type of loan you defaulted on. You would need to check with a mortgage company or bank to determine which time period your prior mortgage falls into. Perhaps you were caught up in the housing debacle and lost your home to foreclosure. That takes a huge hit on your FICO score.
There is some good news on the horizon. Many first time home buyers have not built solid credit and therefore their scores are below 600. Folks recovering from a financial hardship often find their scores have suffered and fallen below the standard required.
The good news is that some banks are relaxing their qualifications and accepting a 580 credit score or above. That will help out tons of buyers who have been locked out of the housing market.
Other qualifications are still in affect. The debt to income ratio is still 43%. Your total monthly payment obligation including your mortgage cannot exceed 43% of your gross monthly income. If you had prior late payments you have to show 12 months of on time payments.
The lowering of the score will certainly help a vast number of potential buyers. Consult with your Realtor or local mortgage lender to see which banks are offering to grant mortgages with the lower score.