Soon will come the day in the lives of most readers when purchasing a new home will be a desire realized or a necessity placed on them by the demands of life. Even those who already own a home may be faced with the decision or necessity to refinance a current home loan. Sadly most home buyers and owners plan more for their next vacation or even a family picnic than they do an upcoming mortgage.

Mortgage planning really is a science because it is based on numbers instead of emotions. While the buying process itself may be driven by more than numbers the actual financing of that property, or even the decision to purchase with cash, is primarily a series of numeric calculations. As such there are ways for anyone to plan for their next mortgage in order to receive the best possible rate and terms available.

The four sins

Negative impacts on the applicant’s ability to borrow loans are not always of their own doing yet some are. Clearing one’s history of these three sins, if they exist, will greatly improve their likelihood of not only being approved for a home mortgage but getting the best rate and terms.

1. Foreclosure/pre-foreclosure – this one is the worst. If the applicant has had a foreclosure (outside of bankruptcy) within the last seven years there is a greatly decreased likelihood of being approved for a home loan. Even if the loan approval is granted there may be a higher interest rate due to the risk factor based on historical data. Applicants may be able to challenge with a well written story of financial hardship submitted to the underwriter yet even with the most appreciable of stories the waver may not be granted. In the majority of cases only time can overcome this.

2. Bankruptcy – when completing a standard Uniform Residential Loan Application (URLA) the applicant must also answer the question “Have you been declared bankrupt within the past 7 years?” Although the question gives the impression this would be an automated denial that is not the case. In fact with a good explanation letter from the borrower an underwriter can approve a loan after as little as 12 months from the date of discharge. If you have any doubts find a direct lender who can give you an underwiter’s determination on the bankruptcy history prior to submitting everything.

3. Judgments and liens – in the public records section of all major mortgage credit reports there will be information about any public records including judgments against the borrower or liens against the borrower. At times liens and judgments exist but do not appear on the credit report. Judgments must be satisfied before underwriters will approve the loan an only a few liens may be subordinated to the new mortgage agreement. One such lien is a federal tax lien which is in a repayment period and evidence of the repayment schedule being satisfied can be provided.

4. Late payments – during the last 12 to 24 months any payments that have been made more than 30 days after their due date are referred to as simply “lates”. They can be late payments on any consumer debt which is reported to the credit bureaus including autom loans, school loans, credit cards, revolving store accounts, mortgages, or any other payments. Some loan programs will allow a couple of lates in the last 12 months and others will not. For conventional loans these lates can either prevent the loan from being approved or result in a higher interest rate for the applicant.

Those four items are often “deal killers” and more difficult to overcome than some smaller “sins”. Planning ahead for a mortgage by knowing just these four things which can result in a negative outcome should help you if you are affected by them. As always, with any mortgage advice, the best thing to do is to speak with a trusted mortgage professional who will take responsibility for their answers to you.

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“Anyone can qualify regardless of credit”. “No application refused”. “No minimum credit score required”. The ads are still out there and mostly on Craigslist. Generally those ads are not from mortgage lenders or banks but from mortgage lead generation companies. Unlike mortgage companies lead generators are not required to be licensed, don’t offer home loan services and are not held to the strict standards of mortgage companies in advertising so they make a lot of outrageous claims hoping to get as many people to give them their information as possible.

The truth is there just aren’t any conventional home loans for people with “bad credit”. Not even FHA as is often misconstrued. FHA home loans, just like conventional home loans, actually require a relatively clean credit history although they do allow some negative reporting – even that is limited to scope and history.

There is an answer, however, and I have been able to use some pretty powerful tools to help people clear up some negative issues on their credit report and get to the point where they could qualify for a loan. Only once did I do that and then had the guy say, “thank you now I qualify at my bank” and waste our time and resources.

Essentially we use some fairly sophisticated credit scenario software. If you’re just a couple of dozen points short of qualifying and the program sees a way to help we can use that. Recently I gave the results to a couple who raised their score from 565 to 635 in just a few short weeks. Currently I have a client who is going from a 545 to a 610 and she only needs a 620 so with an extra month of good payments she will likely qualify.

This is not for people who just want a quick fix so they can “get a home”. This is for people who have made a couple of bad decisions but have matured and understand the importance of maintaining a good credit history. It is for people who are serious about makeing all of their payments on time and not getting overburdened with debt for things they either don’t need or can wait until they can pay cash for.

If you have bad credit but recognize you have been through a “rough spot” or have learned to be a better steward then this program can help you. There is no charge for it … the cost comes from “my pocket”. I get repaid when we get you qualified and you buy a home. This is not for people who don’t have any intention of buying a home and just want their credit to get better. It’s not a credit repair or credit restoration scheme where you pay me up front or even after I get your credit up to snuff.

It’s a powerful tool to help those who are serious about owning and caring for a home but who may have had issues including bankruptcy, judgments or other issues. Call me and let’s talk. Georgia only at this time.

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