Home Ownership

Home ownership is still a major part of the “American Dream”. It creates long term financial stability as the mortgage is paid down and the home appreciates.  It also creates a sense of pride, satisfaction and enhanced well-being.

However, being able to buy a home with less than perfect credit is much more difficult than it was even just 5 years ago. The guidelines to qualify for a home mortgage, or receiving any kind of credit, now require a larger down payment, a lower debt to income ratio, and a higher FICO or credit score.

Mortgage brokers are telling us that it takes a minimum 640 to 650 credit score to be considered for a loan to purchase a home.  Given the current guidelines, the estimated 43 million people who have a credit score of 599 or lower cannot purchase a home without cleaning up their credit history and increasing their credit score. This is also true for people that want to refinance a high interest, adjustable rate loan.

If you have less than a 640 credit score there is good news!  You can eliminate the derogatory items from your credit report and sufficiently increase your credit score to the 640 or 650 mark. With a 640 FICO score you will pay higher points and a higher interest rate on your loan but the purchase of a home and on time payment of the mortgage each month will increase your score over time so that a refinance at a lower rate is a possibility in the future.

Eliminating these negative items from your credit report does take time. So even if you do not yet have a sufficient amount of money for the down payment you should begin to clean up your credit report and increase your credit score now. Then when you do have enough for a down payment you’ll be able to act upon that purchase immediately.