If you're looking to buy a Columbia SC home you probably already know that your credit score is important. But if you have a low credit score, you do still have options.
First, you should figure out what lenders expect of your credit score, since you might be surprised to find that you can indeed buy a Columbia SC home with your credit score where it is.
What Lenders Expect With Your Credit Score
Lending requirements vary from lender to lender, but they've generally become more strict since the sub-prime mortgage lending crisis in 2008. As a rule of thumb, though, you'll need your credit score to be about 650 to get a conventional mortgage –- and that's on the low end.
Remember, the lower your credit score, the higher your mortgage's interest rate is likely to be. This can have a dramatic effect on how much you pay for your home over time. So if you're sitting on the mid-to-low end of the credit spectrum, you may want to look into some of these options, even if you qualify for a conventional mortgage.
Put More Money Down
Mortgage lenders look at a host of factors when deciding whether or not to approve you for a mortgage. One of those factors is your credit score. But another factor is your down payment.
With some lenders, you may be able to offset a weak credit score with a higher down payment. With a bigger down payment, you'll have more equity in your home, which means the lender takes less of a risk when lending to you.
If you've got a substantial amount of money in savings, but your credit score is fairly low, consider applying for a mortgage with a smaller bank or credit union. Many times these smaller entities operate under more flexible lending guidelines, so you can talk to a loan officer about your situation and maybe get a mortgage after all.
Consider Non-Conventional Loans
If your credit score is low (and especially if you combine a low credit score and a small down payment) consider a non-conventional loan. Non-conventional or non-conforming loans, such as the Federal Housing Administration loan, Veterans Affairs loan and U.S. Department of Agriculture loan, often have less stringent lending requirements.
For instance, you may be able to get a FHA loan with a credit score of just 580, as long as you can put 3.5 percent down. With a higher down payment of 10 percent, you may be able to get an FHA loan with even lower credit.
Get Your Credit Score Up
You could just take the time to get your credit score up a little higher. Raising your score isn't complicated, but it does take time, discipline and hard work. These steps can help get your credit score up so that you can qualify for a mortgage:
- Correct any errors on your credit report, especially late payments or collections accounts that aren't recorded properly.
- Make all your payments on time. Late payments are the No. 1 way to ding your credit score.
- Pay down revolving debt like credit cards. A high debt-to-credit ratio is another surefire way to lower your credit score.
- Wait it out. As long as you're paying down debt and making payments on time, your credit score will eventually go up on its own.
Two Final Tips (and these are biggies):
We've all seen the deals from furniture, appliance and electronics stores declaring, "Pay no interest for 24 months," or, "Same as cash" offers. One would naturally think that paying no interest by financing directly through the store makes sense, but DON'T DO IT!
According to most experts including the Federal Trade Commission, this type of financing is generally offered through a finance company, considered to be a "lender of last resort" and as such, can actually hurt your credit score. Finance companies typically deal with sub-prime borrowers and several such purchases can have an increasingly negative impact on your credit score.
Here's another "gotcha." When applying for credit, you may be wrongly advised to pay off an old medical collection bill, for example. Paying off a dormant bill can reset the timing counter from an aging derogatory obligation to a current one and could cost you significant points off your credit score simply because there was new activity on the unpaid obligation that had been aging off your credit score.
Even if you decide to apply for a non-conventional loan or put more money down when you buy a Columbia SC home, these are good credit health habits to maintain for a lifetime.
To stay on top of Columbia SC mortgage news and tips, check out our other articles by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
If you're even remotely considering buying a Columbia SC home, there's no time like the present. The clock is ticking, and soon, getting a mortgage will likely become more difficult and more expensive.
Loan limits for popular mortgages are scheduled to drop in January 2014. The Federal Housing Finance Agency is planning to slash the maximum size of mortgages eligible to be backed by Fannie Mae and Freddie Mac, which currently run as high as $417,000 in most parts of the country and up to $625,500 in pricier cities.
People who need bigger loans will have to go to private lenders, who want low-risk, affluent borrowers who can make a bigger down payment of 25 percent to 30 percent. Private lenders, include many banks, credit unions and independent mortgage lenders, originate mortgages under their own terms and in most cases hold the loans on their books. Most are very selective, seeking out affluent borrowers who present little risk of default.
Buying a Columbia SC Home – ARM's May Be The Only Option
Applicants buying a Columbia SC home who qualify for private mortgages could find that adjustable-rate home loans are their only option. With ARMs, borrowers have a fixed rate for a set period of time – often five years – before rates become variable. ARM origination in the private market is already on the rise.
Private mortgages tend to charge higher interest rates than Fannie Mae and Freddie Mac-backed loans. But increased lender appetite for private mortgages has helped lower their rates, which are hovering near and in some cases lower than rates on government-backed mortgages for people buying a Columbia SC home.
It's easy to make mistakes when buying a Columbia SC home and looking for a mortgage for that home.
Problems to Watch For When Getting a Mortgage
1. Check your credit before you let a lender look at it. Clean up any problems you find on your credit before a lender sees it, and you'll be offered a better deal. If a lender sees problems, it's a sure thing that your rate will be higher.
2. While they're still available, get a pre-approval letter before you start shopping. Many lenders are getting away from giving out these commitments, but while you still can, get pre-approved for a mortgage before you start looking at buying a Columbia SC home.
3. Shop for the best deal on your mortgage. Don't just assume you're getting the best rate possible with the first lender you talk to. It pays to shop around for a mortgage a lot more than you do when buying gasoline for your car.
4. Don't just focus on rates. Learn about all the fees a lender can throw at you. Mortgages are often loaded with fees, and these fees can cost you money if you don't shop these as well.
For more tips and articles on buying a Columbia SC home, click over to our Columbia SC Home Buyer Tips section under Columbia SC Real Estate Categories to your right.
Whether you're buying a Columbia SC home, or just shopping for a new car, most every lender you apply to for a mortgage or loan will want to see your credit report and your FICO score. What most people don't realize is, the FICO score your lender pulls and the one you may have paid for are not always the same. In fact, in most cases, they are quite different.
This is why we say, "Do Not Buy Your FICO Score", because you're most likely not seeing what your lender sees.
To learn more and stay current on buying a Columbia SC home, and how your FICO score can play into your approval or denial of a mortgage, as well as tips and information on mortgages in general, check out our other articles by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
There is growing trend today among older Americans who are increasingly looking at a Columbia SC reverse mortgage to tap the equity they've built up in their home over the years, now that they are in the low or no income category and can no longer qualify for the traditional refinance or home equity loan.
There are some pros and cons to a Columbia SC reverse mortgage as explained by NBC Today Show financial editor Jean Chatzky…
To learn more and stay current on the pros and cons of a Columbia SC reverse mortgage as well as tips and information on mortgages in general, check out our other articles by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
Columbia SC mortgage rates are declining after the recent announcement by the Federal Reserve that they were not going to start to reduce their Bond buying program. Instead they left their easing program intact for the time being and will continue to buy 85 Billion dollars' worth of Mortgage backed and Treasury Bonds per month.
The slowing pace of economic growth, along with recent lackluster labor and housing market conditions, has clearly spooked the Fed into remaining accommodative.
All told, it appears that any tapering is now more likely to begin sometime next year.
To stay on top of Columbia SC mortgage rates, check out our other articles and tips by clicking on the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.