11 Steps for Getting approved for a Mortgage when you have Bad credit

[Just Information]

1. Find a home to lease option. You need to show 12 months of payments on time. Try for an 18 to 36 month lease option. There are many resources to help you locate lease option property.

Realtor.com is a great source for lease option property

2. You and the property owner need to sign the agreement before a notary and then you need to record the document.

This will cloud the title and provide you what is called notification protection

3. Make your payments on time.


4. Make your payment by check and keep these cancelled checks. This is the best proof to a lender that you have made your payments as agreed.

I suggest opening an account just for this home for better record keeping

5. Keep a copy of your signed contract.


6. Don't wait until the last minute to apply for a mortgage to pay off your option. Start 5 months before your option comes due.


7. If possible holds off on any large purchases until you have paid off your option.


8. Keep your property in good shape. If you are buying your home on an option, the lender will want the property appraised. The higher it appraises for in comparison to what you owe the better for you! Take photos of the property before you move in. Do cosmetic repairs that photo well and improve its appearance.


9. If possible, don't change jobs right before applying for your mortgage (keep that job until you get your mortgage).


10. If you don't have any established credit that reports to the credit bureau - try to establish some. Do not get any more bad credit reports during your lease option.


11. Keep all your important papers together.

John Michael (I will always be new in REI, as long as I keep learning)

[Dan Auito]

Step by step credit repair and homeownership brought to you by John Michael. Solid information you can use to get up and running! :beerchug:

[DionEvalueMortgage]

I am really glad that this post was started. I see so many simple mistakes that cost people loans every day.

1. Proof of mortgage or rent is detrimental. Cancelled checks or money order receipts paid on time every month. Atleast 12 months. 24 is better.

2. Everything is 2 years of history. Employment 2 years, Residence 2 years. Sit down and get all of the information - Name, Address, Phone, Postion, Dates of Employment, Monthly Gross Salary or Hourly Wage.

3. Don't hide information from your Loan Officer or Broker. Some people think they should strecth the truth as if the LO or Broker is writing the loan for them. This is so far from the truth. The LO will paint a picture of you according to what you inform them. If you leave something out and the underwriter finds it....DEAD DEAL.

4. Yes, you have to disclose lots of information - asset information, credit information. The only way around this is a great credit score.

5. When does the clock start? Once the LO has all (ALL) of the personal documentation requested. Then you can start asking where your loan is.

6. Do REAL math on down payment and closing costs. 10% of $100,000 is $10,000. Closing costs with NO concessions should be in the 3% to 4% range depending on state regulations. Thats additional to the down payment!

7. The best thing I see is getting pre-approved or see what you qualify for even if your an investor before moving forward. I see many great credit score people who decide to get into investing and FOLKS, the rates and programs are DIFFERENT!

8. While I hate this rumor I don't want you to take it the wrong way. The credit bureaus allow up to 5 mortgage inquires treated as 1 within a 30 day period. They then allow another 2 between 31 and 45 days. Shop for a mortgage, NO it is not like buying a car! Just be carefull of who you shop with. A broker can potentially use up all of your inquires if they send it to lenders trying to get you approved who pull their own credit before issuing a pre-approval.

NOTE: As of January 1, 2005 the law states a consumer must be informed what specific scores the credit beureaus have on file for each consumer. This HAS to be told to you. Ask.

Sub Note: Becon is a term used for Equifax it doesn't really mean much. Think Klinex and nose tissue. Traditionaly Equifax is the middle of the 3 scores but not always. The other 2 agencies are Trans Union and Experian. The middle of all three (not nesicarrly the average) is what is used to calculate your mortgage or the lesser of two.

Please ask many questions....when the student is ready...the master appears...who eat the grasshopper? :rockon:

[DionEvalueMortgage]

I usually only share this trick with clients but....we are all friends here.

So you know your credit score. Let's just say it is under what you would need to get the finance you want.

A couple of things here:

1. Check the balances of your credit cards and/or revolving credit. Max score model is 50% or less of credit limit. You don't need to pay it down to $0.00, just less than 50%.

2. If you need a score jump, have someone (friends or family) add you to a credit account that is not joint as an athorized user. They can cut the card up and throw it away and remove you when your transaction is done. Make sure the person who does it pays their bill on time and has a trade line with more than 24 months history and ideally 50% balance to credit limit. This will usually give you a good score jump but it can take up to 45 days for it to report. This saves many deals!

Keep in mind credit is like a rumor about you...you don't really have too much control over it.

Good Luck!

[Dan Auito]

Thanks for the insider tips Dion. These are little nuggets of gold! :wink:

[RosewoodTx]

NOTE: As of January 1, 2005 the law states a consumer must be informed what specific scores the credit beureaus have on file for each consumer. This HAS to be told to you. Ask.


Hi,

Great info. I'm wondering if you mean the lenders must inform you or the credit bureaus must inform you? Just wondering who to ask. A couple of years ago I applied for a loan and was told I had a great credit score, so I asked what it was and was told they could not tell me that. Of course, that was before 2005.

I know that in June, here in Texas, I can get a free credit report once a year from the three bureaus, but I was wondering if that will also include the score? Thought maybe you'd know.

[DionEvalueMortgage]

The Lenders must tell you what your score is or the mortgage broker if you are using one. Keep in mind this is not they way to find out if you are just curious though! You can easily goto each of the three repository web sites and order a report :punk:

There should also be a disclosure page in the paperwork you sign in the begining of your loan process which the company will need for audit sake.

[RosewoodTx]

Thanks so much for clarifying that. I did order a 3-for one with score recently. Now I'm just waitin on the freebie reports coming in June.

[mstuartii]

John Michael and Dion- These are awesome !!! Here are a few of my favorite situations that have come up with new investors:

1. Dont quit your day job that we used to verify employment (VOE) just because we went and closed ~ The deal still had to be FUNDED ...Keep that day job at least 30 days after the deal is closed just to be safe !
2. Don't try to buy 3 houses in one week with 3 different mortgage brokers and claim they are all O/O properties ~ SOMEONE will find out !!
3.Don't buy a car the same month you are closing ...If the closing is delayed because the house doesnt appraise and we lose your lock and now I have to shop you again....then you went and bought a 699 a month hummer because this is the DEAL of a lifetime, now you dont qualify because of DTI and you are stuck with a Hummer !!! DUH !!
Anybody want to add to this list???
Michelle :SM103:
Fort Worth, TX

[Dan Auito]

I would also mention that it is also good to go the other way.
#1. Sell that fancy vehicle and get rid of high payment obligations
#2. If you're young or in a position to move in with someone to share expenses then you can save money and not have a high obligation towards current monthly housing expenses.
#3. Refrain from buying nik-naks, doodads and trinkits while you build your capital, have a sale and get rid of stuff that isn't being used or wanted.
#4. Stop drinking, it's expensive and makes you a dull thinker in many cases.
#5. read, ask and act or do, sitting on butt is not for you! :SM117:

[REIaddicted]

I would also mention that it is also good to go the other way.
#1. Sell that fancy vehicle and get rid of high payment obligations
#2. If you're young or in a position to move in with someone to share expenses then you can save money and not have a high obligation towards current monthly housing expenses.
#3. Refrain from buying nik-naks, doodads and trinkits while you build your capital, have a sale and get rid of stuff that isn't being used or wanted.
#4. Stop drinking, it's expensive and makes you a dull thinker in many cases.
#5. read, ask and act or do, sitting on butt is not for you! :SM117:

1. All those nik-naks.. can also be sold in an inside flea market booth. Get a small booth for $25 a month.. keep it stocked with stuff you have like what-nots, stuff in the attic, garage, closests.... have a positive cash flow from this. You can always dump the booth when you are out of stuff :)

2. I dropped my cable to the basic service.. Kids got over not having a zillion movie channels.

3. I also went to dial up instead of $60 a month for DSL

4. Phone service- I got a deal on long distance but dropped the caller Id and other useless add ons.

5. Shopped for the best insurance rate

6. I take a list to the grocery store and buy for 2 weeks at a time at a cheap grocery ware house. ( I take my own bags)

7. take your lunch to work

8. Drink water at work from the tap.. stop buying all the soda.

9. Instead of eating out--- make a frozen pizza or experiment with new recipies.

10. I am trying to quit smoking.. do ya know how much that will save me???

It all adds up when you are building capital ... Just my 2 cents

Lisa

[Jeff Harris]

10. I am trying to quit smoking.. do ya know how much that will save me???


Lisa

Good for you, Lisa! Regardless of how much money you make or how many deals you do, quitting smoking is the very best thing you can do for yourself and I applaud your efforts!
Way to go!

-Jeff

[REIaddicted]

Good for you, Lisa! Regardless of how much money you make or how many deals you do, quitting smoking is the very best thing you can do for yourself and I applaud your efforts!
Way to go!

-Jeff

Thanks there Jeff,
I want to quit for more than $ reasons... but what motivation.. plop the $ I would be spending in a jar and invest in REI...
Let's see
$3.00 a day
x7 days a week
x 30 days a month
x 365 days a year
That is over $1095 a year.... gasp !!!!!!! :SM145:

Now add that to the cable bill I cut down

( haveta sharpen my pencil.. back in a sec)

Saved $80 a month by going basic service
$80 x 12 is, er, ..hmm.. $960 a year.... :icon_redf

Going from DSL to Dial up Saved $50 a month
That is $600 savings

$600
$1095
$960
----------
$2655 a year !!!!! :SM003:

That is savings of $221.25 a month :double0sm on those 3 things alone.

Now, if I will actualy USE those patches I bought..

[Jeff Harris]

I noticed that you've forgone contacts for glasses as well...that'll save a few more bucks. (Frankly, I would have gone with something a bit more stylish but they don't look too bad on you.)

I'm not trying to be mean but has anyone ever told you that you look a little like a monkey with those things on?



I've been wanting to use those lines for weeks now...sorry Lisa...

[Debbie]

This thread is now closed.

JohnMichael no longer participates at Magic Bullets, therefore, he is no longer available to clarify any issues or answer any questions.

Anyone interested in discussing similiar issues/questions is invited to start new thread to copy/paste quotes or include a link to the thread of interest.