No, you do not need excellent credit to obtain a mortgage loan. With that being said, there are definitely benefits to maintaining a good credit score such as getting the lowest possible interest rate, lower down payment, and sometimes lower fees. For conforming loans, 640 credit score will get you a good rate while for jumbo financing, a minimum score of 680 will get you a decent interest rate.
If you do have recent bad credit in the last 4 years, an FHA loans allows credit scores as low as 500, but a 10 percent down payment is required. FHA permits borrowers with a credit score of 580 and higher to make a 3.5 percent down payment.
It will be a factor if you need both of your incomes to qualify for a mortgage. If your spouse has a very bad credit history then you may want to consider applying on your own, which means only your income is being used to qualify. The same rule applies for a co-borrower (aka co-signer).
Yes, it's possible to still get approved for a mortgage after a bankruptcy, foreclosure or short sale. There are additional requirements such as a 15-20 percent down payment. For better interest rates, you will likely need to wait four years. Waiting periods for those with a short sales and foreclosures are different based on the loan amount you're seeking. Contact us to learn about your options.
Your interest rate is the cost of borrowing the principal balance. The Annual Percentage Rate (APR) includes both your interest rate and any additional costs or prepaid finance charges such as the origination fee, discount points, underwriting, settlement, title insurance, processing, credit report, and other fees. The APR helps you to compare the loan cost if you are applying with other lenders.
Closing costs are fees which include your credit report, appraisal, physical inspection, settlement agent, underwriting, loan origination, and associated fees. In summary, these usually range from two to three percent of the home's appraised value.
Most borrowers lock their interest rate once they are approved for the loan. Although, certain loan programs do allow the borrower to lock the rate while shopping for a home.
Discount points is a fee that you pay up front (or at closing) to obtain a lower interest rate. One "point" or "discount point" equals one-percent of the loan amount, so on a $450,000 mortgage, one discount point would be $4,500. You can choose to pay a quarter, a half of a discount point as well. Discount points are tax-deductible. We can compare loans side by side to view the savings over the long-term by paying points and not paying discount points.
A mortgage closing can be as quick as 15 days (business days) but it usually runs from 30 to 45 calendar days. The timing may fluctuate a lot depending on the lender and the type of loan program.
Mortgage insurance (PMI) protects the lender against a financial loss in cases where the borrower stops making the monthly payment. PMI is necessary on mortgages that have down payment less than 20-percent of the contract price or the appraised value, whichever is less.
Some ways to avoid paying PMI are by getting a first and second loan such as an 80/15/5, in which a first loan (80% LTV) and second loan or home equity line of credit (HELOC) (15% LTV) are borrowed on the home. The "5" in the 80/15/5 indicates the down payment amount, 5-percent.
Notification of being pre-approved can range from to 2- to -8 hours on a regular week day. We need to confirm the income, assets, and employment documentation you provide.
An escrow account is set up by your lender and they will collect a portion of your monthly mortgage payment to pay the property taxes, homeowner's insurance, and if applicable mortgage insurance. Depending on the loan program, an escrow account may be mandatory.