Secrets To Getting a Mortgage Even With Bad Credit

Getting a mortgage can be tough these days, even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren't so bad.

At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago, cannot qualify today."

one-in-four mortgage applicants was denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply, many discouraged potential borrowers don't even bother to apply anymore.  Yet, there is money to lend.

Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FMCC, Fortune 500), the two government-run mortgage giants:

• The ability to make a 20% down payment, plus closing costs.
• A good credit score. Borrowers usually need a minimum credit score of 620.
• Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income should go toward housing costs.
• A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if a borrower defaults, the bank sells the home to recoup the loss.

In today's market, however, even having all four of these factors in place doesn't always guarantee that you will get a loan. But, for every client who gets rejected, there are those who have been much luckier at landing mortgage loans. And typically, they have turned to the Federal Housing Administration (FHA) for help.

Standards for these loans, insured by the FHA and issued by regular mortgage lenders, are flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.
For years, the FHA had no minimum credit score requirement at all. Now though, it requires a minimum of 580 credit score to qualify for a 3.5% down-payment and 500 credit score for a 10% down-payment.

FHA is willing to overlook a blemish on a credit report, even a big one,  if other factors are favorable.
Do you have problem getting a loan, even though you have perfect credit? GO FHA!

Andre Plessis, REALTOR & Financial Educator
Los Angeles, CA
http://www.wealthcreationteam.net/