Kristy's Blog

Q.
How do you get a mortgage if you don’t have a good credit score? How do you boost your credit score? How long does it take? I am looking for examples of a minimum credit scores and different types of mortgages that can help people with lower credit scores.

A.
If you have bad credit, you still have some options.

If you don’t have a good credit score, say 620 or lower, you can apply for:

• An FHA loan. The FHA guidelines say that credit scores as low as 580 FICO qualify. The reality is that banks have their own standards, and you will be hard pressed to find a bank that will loan to anyone below a 620 credit score. A 620 score gives you lots of room for error – late pays, collections and even a bankruptcy can appear on your credit report and you will still exceed 620.
• If you’re a veteran, you can apply for a VA loan with low credit scores. There is no minimum score requirement, but the money lent still comes from a bank. Banks are still insisting on a minimum 620 credit score in most cases.
  You can also apply for a hard money loan if you have sizable cash, in the neighborhood of 40-50% down payments on a home. These loans typically come with high interest rates and short loan term (6-12 months)
• You can apply for a conventional loan if your score is 620 or higher, new regulations put into place on December 1, 2014 has had the affect of banks dropping their score requirements from 640. However, it is still difficult to get a conventional loan even if you do have good credit; the documentation is onerous.

If your credit score is low, some fast fixes (results within 30-60 days).

Some long term fixes (1 – 2 years):

• Pay your bills on time. Consider yourself starting with a clean slate and start making payments on time. Negatives, such as late pays become less weighty for keeping your score down for 2 years.
• Most people have their credit get out of hand because they are not spending optimally. Create a budget to make sure you make all of your payments on time. Timely payments will start raising your credit scores after about one year.