In the current economic climate, there is a perception that Austin home loans in general are more difficult to get and if you have bad credit…well, forget about it. However, that perception is not necessarily the reality. If you have gone through bankruptcy or foreclosure it can be harder to get a home loan and there is not much to do about that reality; but it’s not impossible. Some lenders will consider your loan application two years after a foreclosure and four years after a bankruptcy.
How Lenders Interpret Credit Scores
But what about getting Austin home loans if your credit is just a little less than perfect? Basically, a low credit score means that it’s harder to get approved for a mortgage loan. Information about your credit score was covered in a blog post last month (read Mortgage Loans and Credit) last month, but overall, lenders are looking for scores in the upper 600s and above. Anything over 750 is an excellent score and once your score wanders down into the 500s you are considered a credit risk.
All things Considered
This is where working with the right mortgage lender can make all the difference in getting Austin home loans. In addition to looking for bankruptcy or foreclosure, lenders are also looking at your payment history. They are looking for any delinquent payment history, especially late payments in the last 12 months. They consider how long you have had credit and how much of your available credit is currently in use.
Lenders should Guide You
Improving your credit score and financial standings will give you more options for buying a home. A lender should be willing to sit down with you and give you an honest assessment of your financial health. There are some proactive steps you can take to put yourself in a better credit position and a good lender is willing to take the time to advise you on improving your financial health.
Repairing your Report before Applying for a Home Loan
You can start your Austin home loan process by getting a copy of your credit report. It is not uncommon for credit reports to contain errors or old information that you are eligible to have removed. Double check account numbers and balances for accuracy. Make an effort to bring any delinquent payments up to date and bring any high credit balances down.
Austin FHA Lenders can Help
Sometimes a larger down payment can help to purchase a home with bad credit, as well. A lender authorized to offer FHA loans guaranteed by the Federal Housing Administration is a good place to start your search if you are a first time home buyer with some credit issues in the past. Watch out for predatory lenders promising terms that sound too good to be true.