Learn How To Build and Repair Your Own Credit

How To Structure Your Credit For A Home Loan

.Are you looking for a mortgage in 2021 but don’t know where to start because of your credit? Most people go into credit repair, especially in 2021, to buy their first home. However, they don't know where to start.


Many people assume that they just need a good credit score and they can go in and get a home loan. That’s not the case!


In this article, you are going to learn what most loan offices are expecting from their customer to breeze them through the perfect loan application.


Common mistakes


Driving their homes’


One of the biggest mistakes that first-home owners make is ‘driving their home.’ This simply means purchasing a new vehicle, or a used vehicle because they want the stigma of going to the new house with a new car before getting the home loan fully finalized.


This big mistake ruins your credibility. If you a pre-approval, you should buy nothing. You should have your debt-income ratio remain clean as possible


Basic factors loan officers look at before loan approval

Debt-income ratio


Your debt-income ratio is (your expenses-your income =what's leftover). What's leftover is what the loan officers want to see. They want to see a lot of leftovers where they get confidence that you are going to pay the loan back 3 or 4 times.


When you purchase new loans to get new debts, the debt-income ratio completely throws off the debt to income ratio and potentially brings your liability upon the loan agreement.

Therefore, don’t put yourself in a position to drive your home. It’s better to drive to the car lot with your home keys than to drive to the closing table with your car keys.


Credit


About 74% of loan officers can’t get the deal done because the client has bad credit. If you have three or more derogatory marks on your credit report, don’t even start the loan application because it’s a waste of time. Get those items removed first. Make sure that your credit profile doesn't have over 3 derogatory marks.


Do you need any help to remove any derogatory marks? Go to mycreditapproved.com. This software is helping thousands of people remove derogatory marks themselves.


Inquiries


Inquiry is anything that you apply where you can debt back. Having over 5 inquiries can deny you loans because some lenders frown upon any inquiries of more than 5. These over five inquiries can make your credit file look desperate.


Even though it’s not mandatory to have less than 5 inquiries, you can try structuring your credit report and file where you don’t have any liabilities and walk into a loan officer’s desk.

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Your chance of approval is excellent

Student loans


You should make sure that your student loans are in good standing. Do not let your student loan be in default because it can hurt your potential in two different factors- the credit and the income ratio.


Whether your student loans are in default or in good standing, the loan officers are still going to apply the debt-income ratio. If you are in default of those two loans, that would be a derogatory mark and it will offset your debt to income ratio. This will cut down your chances of getting approved

Loans


There are three major common loans that loan officers like to use. These include;


• FHA


• Conventional


• USDA


The FHA loans are the lowest I have seen someone get approved for with 580 as the middle score. Middle score is when you have 700, 699 and 698. 698 will be your lowest, 699 will be your middle and 700 will be your highest score. Your middle score can change every month. It’s therefore advisable to be conscious about what your middle score is.


Use Fico to determine your score because it will give you the best description of what the lenders are looking at. Never go to the loan officer with a 580 credit score. This is because the lower the credit score, the fewer incentives you are going to get, the high-interest rates you are going to pay and the higher down payment you are likely to pay as well.


The more credit score you can apply to your profile, the better chance you have of getting those incentives and prime interest rates. If you want to get an FHA loan, Fico at least 660 as this will give you an average interest rate and you will qualify for a decent package of whatever the loan officer can give you depending on your debt-income ratio.


A conventional loan is probably the best when it comes to getting approved as it’s a little more stringent. It only depends on your credit score. The middle credit score minimum usually considered is around 680.


Because you would want to go with a middle score, conventional at a 720 is at least what you want to walk to a loan officer table asking for a conventional loan.


The USDA loan requirements depend on the property you are interested in and the zones of the program you can qualify for. This means that if you are interested in a property, then that property must be covered within that zone.


The minimum requirement for a USDA loan is around 660. However, you can get approved for around 620 depending on your loan officer, your debt-income ratio and the income ratio.


If you looking to have your first home loan in 2021, considering the above factors will help you structure your loan and earn you a loan officer’s approval.

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