Do you want to get a new home, but have less than perfect credit? Check here what happens when your credit is not perfect. It can certainly cost you more, and you might need to explore a few new options.
When you buy a new property, you probably want to consider all the best options available to you. If getting a mortgage is the way to go, you might consider a few options. The first thought might be going to a bank and checking out the regular, plain old vanilla conventional loans.
Conventional loans are mortgages originated by banks, lenders, and brokers, directly to consumers called primary market, and then, once all the documents are signed and the money is paid, the transaction is sold on the secondary market to Fannie Mae and Freddie Mac, which are government sponsored enterprises that help banks and lending institutions, providing more funds for additional loans. For this reason, the loans banks provide must be compliant with the requests of the Fannie Mae and Freddie Mac from the beginning.
These requirements are based on ratios that show that the borrower have the ability to pay back the loan.
- Good credit score – at least above 680.
- New loan.
- Up to $417,000 loan amount.
- Substantial deposit – at least 20% down.
In most cases, one of these items does not fit.
CREDIT SCORE: You can check your credit free of charge here. You credit score might be too high if you have many credit cards open, even if you do not use them. Or if you used too much of the credit available to you. A good rule of thumb is not to use more than 30% of the credit available to you. You can check how long it takes to get rid of your credit card payments here.
NEW LOAN: It is always easier if you are trying to get a new loan. When you refinance, it shows that you are trying to get out of a loan that it is being difficult to pay, which in itself does not give much confidence to the banks on your ability to pay back.
LOAN LIMIT: This limit was set as a guideline in 2013. There has been some temporary increases in economic stimulus packages in the past, but not many banks offer it today.
DEPOSIT: Perhaps 20% down is too much to put down. For less than 20% deposits, all banks require an insurance premium, called PMI, or Private Mortgage Insurance. This is not the insurance on the property, but an insurance on the payments, which can raise substantially the premiums every month.
Foreign National Loans are available to immigrants and tourists alike only from a few selective banks. Their requirements are very different, but offer very attractive rates for those who qualify. You can read more about them here. The risk measurement is different as well, so the deposit requirement will be between 30-35% and some banks will offer loans above $100,000 and up to $300,000 while others will offer only above $300,000.
If you are ready to purchase your property, and would like to start the process, give us a call.
We have wonderful options for you.