BAD CREDIT SOLUTIONS
Bad Credit? Qualify Yourself For A
Zero Down Mortgage Loan
by: Nick Graziano
I decided to write this article today after closing a
home purchase loan for a couple that had some major credit
issues. They got into the house with ZERO down payment,
and only had to bring $600 for the closing costs. Their
situation was pretty bad, Im talking about a bankruptcy
2 years ago, thousands of dollars in outstanding collections,
charge-offs and debt to income ratio of 49%. By the way,
we left all of their outstanding charge-offs and collections
open which means they didnt have to pay any of them
off! So many think they won't be able to qualify for a
mortgage loan. Many will keep thinking they can't qualify
until they read this article.
My name is Nick Graziano and I have been employed as a
Loan Officer for 5 years. I have experience originating
conventional mortgage loans as well as sub-prime (non-conventional)
residential mortgage loans. Many of the clients that I
deal with have great credit (and know it) and have no
problem getting a loan but then there are those with credit
problems (and they know it too). The ones with great credit
are the ones that are easy to close, get the best rates
and all with minimal time involved on the part of myself.
But, this article is for those with credit problems, low
income and those who cannot afford a down payment. I am
going to show you how to qualify for a loan with ZERO
down payment, and the only out of pocket expense will
be less than $1,000 ( if any at all) to cover some of
the closing costs. This is just an example of one particular
loan program that I use but there are numerous others
out there. I picked this loan program because it allows
100% financing down to a 575 credit score
I see it on a daily basis.
Everyone wants to own a home and those with credit problems
are calling every mortgage company in the phone book and
applying on every mortgage website out there. (And there
are many out there). Only to find out later that every
time a mortgage company pulls their credit, their credit
score dropped a few points, or that the particular lender
doesnt originate the type of loan that you need.
That is frustrating.
Step by Step
Here is where I show you how to qualify yourself for a
zero down loan.
1.The first thing you need is your tri-merge credit score.
I would be more that happy to suggest a few places on
the internet that you could go to get your credit score
but I dont want this article to seem like an advertisement.
So, the best thing to do is to do a search on yahoo.com
for terms like free credit reports, or tri-merge
credit report. Just make sure that you end up pulling
a tri-merge credit report on yourself. A tri-merged
credit report pulls your credit profiles from the 3 major
credit reporting companies and merges it into 1 report.
The nice thing about pulling your credit yourself is that
it will NOT affect your credit score. Bookmark this page
while you go get a copy of your credit report and then
come back to see the additional steps.
2.What is your credit score? Most mortgage lenders will
use the middle of the three scores. Example: Your credit
scores are 576, 525, 599. In this case you would use the
576 credit score since it is not the lowest score and
it is not the highest.
3.Is your middle credit score at least 575? If so, congratulations
and move on to the next step. If your middle score is
less than 575 you have some homework to do. You can either
sign up with a credit repair company (search yahoo.com
for credit repair) to try and remove some derogatory
items on your credit which will raise your credit score
OR you can try to acquire some credit to help re-establish
your credit worthiness. The easiest way to re-establish
your credit is by either getting a car loan or credit
card designed to help re-establish your credit. Again
search yahoo.com for credit cards to re-establish
4.Do you have a bankruptcy or foreclosure in your past?
Has it been 2 years since it was discharged? If yes, move
on to the next step! If not, unfortunately in most cases
your bankruptcy or foreclosure will need to be discharged
at least 2 years or you will need to have at least 5%
5.You will need to document 24 months of recent mortgage
or rental history. If you rent from a property management
company we will need a Verification Of Rent completed.
The form will be supplied by your mortgage lender or broker.
If you rent from a private landlord, you will need 24
months cancelled checks/ or money order receipts with
no payments over 30 days late. Sorry, you cannot prove
your rental history if you pay your landlord cash every
month, unless they are a property management company.
If you are unable to document your rental history there
is a way around it. Get your credit report and look for
the following: Do you have an active credit line on your
credit report that has been open for at least 24 months?
Has this credit line had any activity in the last 6 months?
If so, move to the next step.
6.Look at your credit report. Do you have a credit line
that has a 12 month history reporting? If so and as long
as you have no more that 2x30 day late payments then move
on to the next step.
7.Look at your credit report again. Do any of your credit
lines have a high limit of at least $3,000. If so, move
to the next step.
8.Now take one more look at your credit report. You will
need 1 more additional open credit line reporting on your
credit report. (It does not matter how long it has been
open or how much the credit line is for).
Well, congrats! You made it this far which means that
your credit might qualify for a Zero Down Payment Loan.
The loan program you qualified for is subject to change
and is subject to additional conditions. This article
should not be construed as an advertisement to lend. These
are the steps that I go through when trying to pre-qualify
a client that has credit problems. There are many more
factors to determine so please discuss this with a qualified
You are probably asking yourself what you are supposed
to do with the information that was given to you in this
article. The first thing is to contact a few mortgage
companies. Ask them if they have any zero down loan programs
that will go down to a 575 credit score, or whatever your
credit score is. Remember, you will need at least a 575
credit score to qualify for this particular loan program.
Also, in order to minimize your out of pocket expense,
ask your mortgage professional if the property seller
is allowed to pay 6% of the purchase price towards closing
costs. If so, you will need to remember to negotiate that
into your purchase contract when you make an offer on
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