Zillow.com studied 25,000 online home mortgage applications and found that prospective home buyers with credit scores lower than 620 could not get Columbus loans approved, even when they were able to make a down payment of 25% of the purchase price.

Only 47% of Americans have a credit score higher than 720 – which is considered good credit and would qualify you for the lowest interest rates on Columbus loans.

Another interesting finding by this study indicates that for every 20 points drop in your credit score your interest rate goes up by 0.12 %. Over the life of a 30 year mortgage this could cost you tens of thousands of dollars.

So what options do you have to get Columbus loans, if you credit score is below 620?

1. Try to get an FHA Loan: they still don’t rely exclusively on credit scores and may use alternative “credit” to approve your loan. FHA loans require a much lower down payment and may be your only option, if your credit score is below 620.
2. Get Seller Financing: this may be the only option for many home buyers that can’t get loans through a bank. Many sellers are very motivated, as they can’t sell their homes as quickly as the want and will consider seller financing. You may get away with a relatively low down payment of 5% or 10% of the purchase price, but you have to be ready to pay full price for the house.

If you are ready to buy a house and can’t get regular bank financing, give us a call. We have a limited number of seller financed properties available and we work with one of the best FHA lenders in Central Ohio.

You can reach Columbus real estate agent Susanne Novak at (614) 975-9650.

Thanks for reading our Columbus Loans & Columbus Home Mortgage Blog
Go to here to find great Columbus Houses

Technorati Tags: Columbus House, columbus houses, Columbus Housing, columbus loans, columbus realtors, columbus realty, credit score

At the end of last week we received an email from our favorite loan officer. She told us that FHA changed guidelines for minimum credit scores required to ensure loans. Until now it was still possible to get Columbus loans with credit scores as low as 580. Fifth Third Bank was one of the few Columbus mortgage lenders that approved applications with scores below 620.

Now that has changed. If you have any application in, you can still close with a lower credit score before the end of October, 2009. All new applications fall under the new rule and need to show a 620 FICO score.

What does this mean for you as a prospective home buyer?

If your score falls between 580 and 620, and you planned to buy a house to take advantage of the first time home buyers tax credit as well as the low interest rates, you are out of luck. You won’t have enough time to improve your credit by 20, 30 or 40 points to qualify for a loan before the closing deadline expires. You may have a chance to buy a home with seller financing and still claim the tax credit – I will talk more about this option in another post.

For those of you with solid credit scores, now is the time to make an offer on one of the listed Columbus houses. You should be able to get FHA financing, if you meet the following criteria:

• You buy a personal residence as an owner occupant (up to 4 units)
• Your mortgage amount is below the FHA limit set for your county ($341,250 for Franklin County OH)
• You can come up with the required down payment of 3.5% of the purchase price (if you buy a HUD home you can get away with only $100 downpayment)
• You meet the minimum income requirements and can show 2 years of job history or tax returns, if self employed.
• Your credit score is above 620 and you didn’t have a bankruptcy for 2 years.
• Your new home appraises for or above the purchase price.

There a number of obstacles in the FHA loan approval process. However, an experienced loan officer can get it done in 30 days. Your property has to be in good condition. If it needs repairs you may be able to establish a repair escrow to cover these expenses – this is commonplace with HUD homes.

A good credit score is the key for getting Columbus loans approved by your lender. Take care of your credit score and the harsh lending environment will not effect your ability to get a Columbus home mortgage.

Thanks for reading our Columbus Loans & Columbus Home Mortgage Blog
Go to here to find great Columbus Houses

Technorati Tags: Columbus House, columbus houses, Columbus Housing, columbus loans, columbus realtors, columbus realty, credit score, FHA, FICO score

Here are 5 interesting facts about credit scores that may surprise you:

1. Income: Your income level has no bearing on your credit score, but it will determine the amount of your home mortgage. A person earning below minimum wage could easily have a great score while a millionaire earning six-figures per year could have a really low credit score. The basis behind the scoring system is to determine how responsible a person is with their money, not how much they make.

2. Old Accounts: When the credit bureaus calculate your score, they look at the types of credit you have and how old your accounts are. Older, active accounts show a lender that you haven’t consolidated or negotiated your debts, but that you maintained them with a level of financial responsibility. If you intend to pay off some debts, pay off the newer ones first and leave the older ones open.

3. Don’t Pay Collection Agencies: Did you know that paying off collection agencies or debts that are older than two years won’t help your credit score? The Credit Bureaus calculate your score based on the most recent activity on the account. If the last activity is more than two years old, any derogatory entry in your credit loses its negative power.

Be aware though, that if you negotiate a payment plan with a collection agency verbally, this is considered an agreement. It may reset the activity date to the day of the conversation and you end up with a recent entry in your report. So don’t reactivate old collections!

4. Debt/Limit Ratio: Credit bureaus reward people who demonstrate that they control their spending habits and don’t max out their credit balance or even overdraw their credit limit. It’s critical you keep your balances way below your actual credit limit. If your card balances are below 30% of your credit limit you will definitely improve your score.

One important thing to remember: banks make their profits by keeping you in debt. It does not hurt to increase your credit limits as long as you act responsibly. Borrow only what you can handle based on your income.

5. Frequency of Credit Applications: Did you know 10% of your credit score is based on the number of times you’ve applied for credit? Every time someone pulls your credit, the enquiry is listed on your credit report. The more enquiries you have, the lower your score will go.

If you applied for many credit cards recently, you should wait a few months, pay down your balances and build a history, before you apply for new ones. Not applying for new credit will increase your score, as older applications fall away.

Thanks for reading our Columbus Loans & Mortgage Blog
Go to here to find great Columbus Houses

Technorati Tags: columbus houses, columbus loans, columbus realtors, credit bureau, credit repair, credit score, home mortgage