Buying a home is something many people aspire for, but sometimes plans can get pulled a little off track. Spurts of financial turmoil can put people behind on their bills and damage their overall credit. But those who find that a few mistakes have led to marginal credit shouldn’t have to give up on their dream of home ownership. In fact, the prospect of home ownership might be just the thing it takes to start taking all the right steps to improving their overall credit worthiness. In the meantime, they can start taking steps to secure a home loan. By talking to a Starboard Financial loan officer about conventional home loans or other types of loans, you can get the help you need to get on the path of home ownership.
How Credit Affects Conventional Home Loans and Other Types of Loans
Obviously, the better a person’s credit score is, the better chance they have of qualifying for a mortgage. But credit isn’t the only thing that is being considered when it comes to getting conventional home loans. In the spring of 2014, 33% of mortgages that were approved by lenders went to people with credit scores under 700. A year earlier, only 27% went to these borrowers. This suggests that overall many lenders are more lenient about that actual number. More lenders are likely to also look at a person’s circumstances. For example if they fell behind because of a big company layoff they may receive more “slack” than someone who does not have a satisfactory reason for falling behind. Having a good rental history can go a long way toward getting approved even without good or excellent credit.
It also makes a difference whether a lender underwrites mortgages through an automated process or a manual process. With an automated process, Fannie Mae or Freddie Mac issue conventional home loans based mostly on the outcome of a software program that calculates credit score, total debts, and income. This is also known as a conforming loan. Manual underwriting brings in the judgment of the lender who are more likely to look at the specific circumstances. This is a non-conforming loan. Starboard Financial offers both of these options
In most cases, if you have a lower credit score it is easier to get an FHA loan that a conventional loan. Borrowers don’t need to come up with as large of a down payment. In many cases, as little as 3.5% is accepted. These loans are also more lenient when it comes to income to debt ratio. FHA loans do have more rules, including a lower loan amount and a requirement to live in the home as a primary residence.
VA & USDA Loans
Fewer people qualify for VA or USDA loans. For USDA loans there are strict income requirements, situational considerations, and home location restrictions. VA loans are exclusive to qualifying veterans and limited family members.
At Starboard Financial, we want you to be able to qualify for a mortgage at the best possible interest rate. Having a few hiccups in your credit history won’t necessarily disqualify you from owning a home. We’re ready to look carefully at your application and situation and help you find the best type of loan for your situation. We will also encourage you to take steps to improve your credit score. If your credit proves to be an immediate barrier, your focus on improvement may one day help make home ownership a reality. Contact us to learn what Starboard Financial can do to help you become a home owner.