Here are some things to know when purchasing your own home:
- Minimum credit score to qualify to purchase a home: 620 for traditional mortgage and FHA. VA Loans (military veterans) can go down to a 580 with 100% financing (no money down). Attaining a credit score of over 700 will save you thousands of dollars in the future, especially when it comes to mortgage costs and monthly payment.
- Minimum down payment for a purchase is between 3.5 – 5.0% (which is roughly the average down payment for a rent to own property)
- Monthly mortgage payments nowadays are usually much lower than rent payments.
- After filing a Chapter 7 bankruptcy, mortgage guidelines state that one cannot qualify to get a mortgage for at least 2 years from the discharge date (also, one cannot have any late payments on any accounts after filing a bankruptcy)
- After filing a Chapter 13 bankruptcy, mortgage guidelines state that one can qualify to get a mortgage 1 year after the filing date, as long as he/she is on time with the payments associated with said bankruptcy (also, one cannot have any late payments on any accounts after filing a bankruptcy)
- Mortgage guidelines state that if a person has a foreclosure on their credit, they are at minimum, 3 years away from qualifying for a mortgage, depends on the bank.
- Mortgage guidelines state that if a person has a short-sale on their credit, usually the waiting period is a minimum of 3-7 years.
- Most mortgage companies do not want to see any collections reporting on credit (even if their score is above a 620)
- Positive credit is essential. Even if one has a 620 credit score, if you do not have any positive credit history most banks will turn you down. Underwriters at banks need to determine the person’s “repayment ability”. If one has no positive trade lines, an underwriter cannot/will not sign off on a loan because they cannot verify that the person has a proven track record of paying bills on time.