With My Credit Score Can I Get a Mortgage?

By: Mike Clover

Are you wondering if you can get a mortgage with your current Credit Score? I am sure everyone is sick of hearing about the current credit crunch. It is a never ending cycle in the lending industry. The banks loosing up and everything starts to foreclose. The banks tighten up and less people are buying homes because they don't have the credit to buy with all the new restrictions. Either way the "American Dream" of home ownership is always on our minds. It's that one common thread of personal accomplishment that all Americans strive to achieve. I know that most people want a piece of the American pie.
I am going to discuss the current plain old vanilla loans that are available to you, and what it will take to get into one of these loans.

FHA loans
FHA loans have been around since the mid 1930's, and is the biggest insurer of loans in the world. (FHA), Federal Housing Authority is a government insured loan that is more attractive to bankers because there is less risk. Basically this type of loan is the strongest loan in the current market. The reason for this is the guidelines to get this type of loan are still the same as they were 5 years ago. There is less requirements to get into a FHA loan, and has a minimum down payment requirement. Here are some key points as to why FHA loans are so attractive today and will continue to be one of the top loans out there.
- Low down payment of 3%
- Will Allow Down Payment Assistance, which eliminates you needing 3% down payment
- Low interest rates
- No Credit Score Requirement
- Allows hardship loans, for individuals that have had past credit issues.
- Allows you to get a loan while in a Chapter 13 Bankruptcy, conditions apply.
- Allows you to get a loan with no credit, typically the underwriter will ask for alternate lines of credit.
Examples:
1. 12 month payment history in good standing from three sources.
a. Electric provider
b. Car Insurance provider
c. Day Care
d. Cell Phone Company

This is just some examples of how someone who does not have credit reporting on their credit report can use alternate sources of payment history to show creditworthiness. You cannot do this with Conventional loans that are backed by Freddie Mac and Fannie Mae.

Conventional Loans
Conventional loans are loans that are not insured by the Federal Government. They are loans that are secured by government sponsored entities, such as Freddie Mac and Fannie Mae. These types of loans are stricter in the approval process, and are typically run through an automated software process. This process either says "yes" or "no." With all the current tightening up in lending, this particular loan is less attractive for borrowers with credit issues and low credit scores. With all the current foreclosures and the tightening up with Mortgage Insurance companies, there is a credit score requirement of 620 or above with conventional loans currently.

Since we are going through obvious changes in lending currently, it is very important you know where you currently stand with your credit score. There are some changes going on in FHA as well, even though FHA does not have a credit score requirement the bank that buys these loans may. So if you have low credit scores, you might need to increase that score even to get a FHA loan in this current market. Get a current copy of your free credit score report, and if you have issues there has never been a better time than now to work on your credit so you can buy in the near future.

Mortgages
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