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Can you qualify for a home mortgage loan with bad credit?
Can you get a loan AFTER a foreclosure, bankruptcy, or short sale?
| Late Payments | Collections and Tax Liens | Foreclosure | Bankruptcy | Short-Sale | Extenuating Circumstances |

First, What is Your Credit Score?

Every mortgage company in MN, WI, and SD uses a credit report to determine your credit worthiness. Upon reviewing your application and credit report, you are given a credit grade, and a determination regarding your loan’s approval or denial. Lenders DO NOT give loans to people with bad credit anymore. If you are denied by a one lender, contacting 10 more probably won't help. Click here for some general criteria used within the lending industry to determine credit.

What credit score do I need for a home loan?

Generally speaking, in today's mortgage world, if your middle credit score is below 620, it is very unlikely that you will qualify for home loan financing no matter what anyone tells you, or what you read  on the internet. While many lenders say they will work with a score below 620, generally speaking, there are many other things on your credit report that will get you denied. Credit score alone does NOT a loan approval make.

FACT: The mortgage and credit crisis which exploded onto the scene in 2007 has eliminated bad credit and bruised credit mortgage loans. Lenders simply don't offer bad credit sub-prime home loans anymore.

With a score below 620, you really should save yourself the hassle. Stop attempting to find mortgage loans, and work on improving your scores instead. Once you have achieved a 620 or higher score, feel free to apply for a home mortgage.

Score

Grade

Credit score rating graph

740 +

Excellent

700 - 739

Good

680 - 700

Average / OK

660 - 680

OK

640 - 660

Below Average

620 - 640

Poor

580 - 620

Bad

Below 580

Really Bad

Review your credit score?

If you are not sure what your credit score is, you should officially find out. You can do that by apply for the mortgage loan. We will pull your credit, and give you a review your exact situation. Another options is to obtain your credit report free from either www.AnnualCreditReport.com (no scores), www.CreditKarma.com (score), or WalletHub. Many credit card or other financial services also give you a free credit score each month on your statement.

PRO TIP: Understand that any 'free' or credit report YOU can obtain anywhere yourself DOES NOT provide you with the same credit scoring model used by most lenders. Therefore any score you are given will likely differ from the score any actual lender provides.This includes when you buy your credit score from the actual credit bureaus. But these services are useful in giving you an idea of your credit score.

CREDIT PROBLEMS & ANSWERS

Late Payments

If your credit has multiple RECENT 30, 60, or 90-day late payments, you probably won't qualify. Especially if those late payments occurred LESS THAN than two years ago. Lenders want a clean recent payment history. Check HERE for some general criteria used within the lending industry when you have late payments.

Collections, Judgements, and Tax Liens

If your credit history indicates unpaid collection accounts, most "A" grade loan lenders will require these amounts to be paid off before the loan is funded. FHA typically will ignore them if they are under $2000, and more than 2 years old. Medical collection "usually" are ignored. Judgments' (you got taken to court & lost), are always REQUIRED to be paid off before you can get a mortgage loan.

Bankruptcy

  • If your bankruptcy is more than 2-year old, you can usually be approved for an FHA loan with as little as 3.5% down.

  • If your chapter 7 bankruptcy is older that 4-years, and you have good re-established credit, you may now qualify for an standard conforming loan.

  • If your chapter 13 bankruptcy is 2-years after discharge date and you have good re-established credit, you may now qualify for an standard conforming loan.

  • If your chapter 7 bankruptcy is 2-years after discharge date and you have good re-established credit, you may now qualify for a VA loan.

  • If your chapter 13 bankruptcy has at least 1-year of on time payments, you may now qualify for a VA loan.

  • If your chapter 7 bankruptcy is 3-years after discharge date and you have good re-established credit, you may now qualify for a USDA Rural Development Loan.

  • If your chapter 13 bankruptcy has at least 1-year of on time payments, you may now qualify for a USDA Rural Development Loan.

  • Foreclosure

  • If your foreclosure Sheriff Sale Date is OVER 7-years old, you may qualify for a standard conventional loan.

  • If your foreclosure Sheriff Sale Date is OVER 3-years old, you may qualify for an FHA loan with as little as 3.5% down payment.

  • If your foreclosure Sheriff Sale Date is OVER 2-years old, you may qualify for a VA Loan with Zero Down Payment.

  • If your foreclosure Sheriff Sale Date is OVER 3-years old, you may qualify for a USDA Rural Development loan with Zero Down Payment.

  • Short-Sale or Deed in Lieu

  • If your short-sale date is more than 4-years old, you may qualify for a conventional loan

  • NO waiting period after a foreclosure for an FHA Loan if you had NO late payments on ANY mortgage or consumer debt in the 12-months proceeding the short-sale AND it was NOT a strategic short sale.

  • If your short-sale date is more than 3-years old, you may qualify for an FHA Loan loan

  • If your short-sale date is more than 2-years old, you may qualify for a VA Loan with  zero down payment

  • If your short-sale date is more than 3-years old, you may qualify for a USDA Rural Development loan with zero down payment

  • Extenuating Circumstances

    The granting of shorter waiting periods to get a mortgage loan is available for many of these loans for extreme extenuating circumstances - BUT it is VERY RARE.

    Non-recurring events way beyond the persons control that result in sudden, significant, and a prolonged reduction in income, or catastrophic increase in financial obligation, like serious illness or death of a wage earner are generally acceptable. Unemployment, loss of job, prolonged strikes, medical bills not covered by insurance, divorce, and the inability to sell a property due to job transfer DO NOT qualify as an extenuating circumstance.

    About the ONLY qualifying extenuating circumstance is DEATH of the primary wage earner, or well documented extended and serious illness of the primary wage earner.

    High Debt Ratios

    If your income-to-debt ratios are too high, you can either reduce your personal debt (i.e., pay down your debt), obtain a debt consolidation loan, pay down your debt with funds from the sale of personal assets (boat, camper, etc.), select a lower interest rate ARM loan, or add a co-mortgagor.  If your debt-to-income ratio is over 43%, you will probably be denied.

    Is a debt consolidation loan for you?

    If you have any late payments on your record, part of the reason may be because of high credit card debt. If you qualify, you can pay off all of your high-interest credit cards into a low debt reduction refinance loan which may be tax deductible (unlike credit cards, which are NOT tax deductible).

    Call us at (651) 552-3681 to speak to an experienced Mortgages Unlimited Loan Officer who can help determine your credit status, or click here to apply online

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    33 Wentworth Ave E - Suite 290
    St Paul, MN 55118

    (651) 552-3681  

    Member in Good Standings, National Association of Mortgage Brokers Read our weekly Mortgage Market review Member in Good Standings, Minnesota Mortgage Association

    Our services available only for properties located in Minnesota, Wisconsin, and South Dakota. PLEASE DO NOT KEEP US A SECRET from your FRIENDS. Licensed as Mortgages Unlimited, As a Lenders One partner, we are part of the 3rd Largest Retail Mortgage Originators in the country. We are consistently ranked as one of the top mortgage lenders in Minnesota by Minneapolis St Paul Business Journal. Any use or duplication of any materials is  strictly prohibited.  All images, text, and materials 1998 - 2017 Joe Metzler. This is the private web site of Joe Metzler, NMLS #274132. All Rights Reserved.

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