by: Nick
Graziano I
decided to write this article today after closing a home purchase loan for a couple
that had some major credit issues. They got into the house with ZERO down payment,
and only had to bring $600 for the closing costs. Their situation was pretty bad,
I’m talking about a bankruptcy 2 years ago, thousands of dollars in outstanding
collections, charge-offs and debt to income ratio of 49%. By the way, we left
all of their outstanding charge-offs and collections open which means they didn’t
have to pay any of them off! So many think they won't be able to qualify for a
mortgage loan. Many will keep thinking they can't qualify until they read this
article. My
name is Nick Graziano and I have been employed as a Loan Officer for 5 years.
I have experience originating conventional mortgage loans as well as sub-prime
(non-conventional) residential mortgage loans. Many of the clients that I deal
with have great credit (and know it) and have no problem getting a loan but then
there are those with credit problems (and they know it too). The ones with great
credit are the ones that are easy to close, get the best rates and all with minimal
time involved on the part of myself. But,
this article is for those with credit problems, low income and those who cannot
afford a down payment. I am going to show you how to qualify for a loan with ZERO
down payment, and the only out of pocket expense will be less than $1,000 ( if
any at all) to cover some of the closing costs. This is just an example of one
particular loan program that I use but there are numerous others out there. I
picked this loan program because it allows 100% financing down to a 575 credit
score I see
it on a daily basis. Everyone
wants to own a home and those with credit problems are calling every mortgage
company in the phone book and applying on every mortgage website out there. (And
there are many out there). Only to find out later that every time a mortgage company
pulls their credit, their credit score dropped a few points, or that the particular
lender doesn’t originate the type of loan that you need. That is frustrating.
Step by Step
Here is where
I show you how to qualify yourself for a zero down loan. 1.The
first thing you need is your tri-merge credit score. I would be more that happy
to suggest a few places on the internet that you could go to get your credit score
but I don’t want this article to seem like an advertisement. So, the best thing
to do is to do a search on yahoo.com
for terms like “free credit reports”, or “tri-merge credit report”. Just make
sure that you end up pulling a “tri-merge” credit report on yourself. A tri-merged
credit report pulls your credit profiles from the 3 major credit reporting companies
and merges it into 1 report. The nice thing about pulling your credit yourself
is that it will NOT affect your credit score. Bookmark this page while you go
get a copy of your credit report and then come back to see the additional steps.
2.What is your
credit score? Most mortgage lenders will use the middle of the three scores. Example:
Your credit scores are 576, 525, 599. In this case you would use the 576 credit
score since it is not the lowest score and it is not the highest.
3.Is your middle credit
score at least 575? If so, congratulations and move on to the next step. If your
middle score is less than 575 you have some homework to do. You can either sign
up with a credit repair company (“search yahoo.com
for credit repair”) to try and remove some derogatory items on your credit which
will raise your credit score OR you can try to acquire some credit to help re-establish
your credit worthiness. The easiest way to re-establish your credit is by either
getting a car loan or credit card designed to help re-establish your credit. Again
search yahoo.com for “credit cards to
re-establish credit” 4.Do
you have a bankruptcy or foreclosure in your past? Has it been 2 years since it
was discharged? If yes, move on to the next step! If not, unfortunately in most
cases your bankruptcy or foreclosure will need to be discharged at least 2 years
or you will need to have at least 5% down payment. 5.You
will need to document 24 months of recent mortgage or rental history. If you rent
from a property management company we will need a Verification Of Rent completed.
The form will be supplied by your mortgage lender or broker. If you rent from
a private landlord, you will need 24 months cancelled checks/ or money order receipts
with no payments over 30 days late. Sorry, you cannot prove your rental history
if you pay your landlord cash every month, unless they are a property management
company. If you are unable to document your rental history there is a way around
it. Get your credit report and look for the following: Do you have an active credit
line on your credit report that has been open for at least 24 months? Has this
credit line had any activity in the last 6 months? If so, move to the next step.
6.Look at your
credit report. Do you have a credit line that has a 12 month history reporting?
If so and as long as you have no more that 2x30 day late payments then move on
to the next step. 7.Look
at your credit report again. Do any of your credit lines have a high limit of
at least $3,000. If so, move to the next step. 8.Now
take one more look at your credit report. You will need 1 more additional open
credit line reporting on your credit report. (It does not matter how long it has
been open or how much the credit line is for). Well,
congrats! You made it this far which means that your credit might qualify for
a Zero Down Payment Loan. The loan program you qualified for is subject to change
and is subject to additional conditions. This article should not be construed
as an advertisement to lend. These are the steps that I go through when trying
to pre-qualify a client that has credit problems. There are many more factors
to determine so please discuss this with a qualified mortgage professional.
You are probably asking
yourself what you are supposed to do with the information that was given to you
in this article. The first thing is to contact a few mortgage companies. Ask them
if they have any zero down loan programs that will go down to a 575 credit score,
or whatever your credit score is. Remember, you will need at least a 575 credit
score to qualify for this particular loan program. Also, in order to minimize
your out of pocket expense, ask your mortgage professional if the property seller
is allowed to pay 6% of the purchase price towards closing costs. If so, you will
need to remember to negotiate that into your purchase contract when you make an
offer on a house. | 