Saturday, June 18, 2011

What Kind Of Credit, Or What Credit Score Do I Need To Buy A Home?

David and I get asked a lot: "what kind of credit scores do I need to buy a home?", or "what kind of credit do you need to get into a home"?

Every loan program is different, and each loan also has different guidelines it follows on credit to buy a home. Some programs require 700+ credit scores while others can allow your score to go all the way down to a 380 believe it or not! It is all about what your report says, not the score itself when it comes to getting into a loan on a house.

It is possible that you may still qualify for a loan even though you have some of these issues in your past:

Collections (even large medical collections)
Credit Card, car, or other debts
Short Sale
Late payments

In our experience when a client checks and/or monitors their credit on their own can be confusing for them. What happens is that they will pull their credit and see their scores. Then, they will either feel defeated and not do anything, or, they will call us and ask to apply for a mortgage thinking they are ok. When we pull their credit it is a different score from what they originally saw - sometimes better or worse! The reason for this could be many things, just keep in mind that it is always better to ask the lender you are applying for a loan through as they are the decision maker anyways.

Here is a brief explanation and what often goes on in these situations:

There are 3 credit reporting agencies that report a credit score for you. Mortgages (home loans) are driven off of a "mid fico" score. What that means is your score, as applied to mortgages, will always be the middle of the 3 scores reported.

For example, if your 3 scores were 600, 700, and 800 then your mid fico (or credit score) would be 700.
When you check your credit, what can happen is sometimes only one credit reporting bureau is checked and people think that is their score! What if the one score you checked is the 600 score? Then you might think you need improvement when really you have a 700!

Another example is when you buy a car, they look at your "beacon" score. So sometimes people will say "I have "X" as a credit score, I just had my credit pulled". Car loans are driven off of a different score than home loans so when we check your credit... That's right, we pull a different score!


You can bring in your credit report, and David can review it with you (if you pulled it yourself) and that's ok. But ultimately he is going to have to pull his own report anyway for the bank.

The best thing to do if you want to buy a home is to have him check your credit, let you know where you are at, what loan programs you qualify for, or, what needs to be done to get you there. We would love to help you with this.

Remember, the first step in buying a home is to get pre-qualified on a home loan! Sellers do not like to deal with buyers who might not qualify. There are plenty of different options out there (even other 100% financing options).  Give us a call, it's easy to get started - Let's check your CREDIT and get you started in BUYING A HOME.

Cheryl Malone -- Real Estate Broker
Windermere Investors Marketplace

David DuBeau  -- Loan Officer  Sterling Savings Bank

Once you are pre-qualified, call Cheryl Malone and "Let's Go Shopping"!

1 comment:

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