bad credit mortgage

How You Can Buy A Home With $24.95?

A client approached me a few weeks back with interest of getting pre-qualified for a mortgage to buy their first home. During our initial meeting, we discussed their goals, where they see themselves in 5 years and cash flow projections based on mortgage interest rates over the next 5 years.  One of the questions I ask, is how the person's credit score is. The client stated they had no outstanding debt with very little credit card balance that is paid off every month.  Once all the necessary information was gathered, a credit check was completed and I was shocked to what I saw in their report. There was an outstanding student loan which showed delinquency for over 21 months which literally had destroyed the client's credit score and history.  I contacted the client to notify them of the issue and they were surprised to hear there was a balance since they stopped receiving a bill after they moved to their new address. They had thought the loan was paid off. Unfortunately, the outstanding balance was minimal but had accumulated lots of interest over the 21 months.

In this case, the client will have to re-establish their credit and show 2 years of good credit history to qualify for a mortgage at a decent mortgage interest rate. There are other alternatives, but are more costly.

By checking your own credit score annually from Equifax ( these type of issues would be resolved. Similar to a medical annual check up, an annual credit check is important to verify there aren't any errors or items that need to be addressed immediately.  The cost of checking your credit score is $24.95.

To discuss your personal mortgage financing needs, please contact me.

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What Determines Your Credit Score?

680, 783, 621.....How are these credit scores calculated?  There are 5 factors that determine credit score.  Here is a breakdown of each factor:

  1. Payment history (35%): What's your track record? Have you missed any payments? Have you made your payments on time?
  2. Amounts owed (30%): How close are you to maximizing your limit? Staying under 65% would not negatively affect your credit score.
  3. Length of credit score (15%): Having a credit card or line of credit for a long period of time helps establishing a good track record assuming no payments have been missed.
  4. New credit (10%): Are you applying for credit cards, retail store cards regularly? Are you applying with 5 lenders for a mortgage? Continuously looking for new credit is a negative.
  5. Types of credit (10%): Healthy mix of credit cards, retail accounts, lines of credit and car loan/lease.

For mortgage lenders, credit scores above 680 are considered excellent, there are cases where some lenders require a 700+ for self employed clients.  For a copy of "Understanding Credit Score" report which provides detailed information on improving and maintaining your credit score, please click here.