Your credit scores, and its effects on buying a home

Your credit history, and credit scores are one of the largest factors in the home loan decision process.

Understanding your credit and how it can get you approved, limit your options, or get you denied is one of the big steps to understand before going out and looking at homes - especially for first time home buyers.

Our home loan experts will be happy to go over your personal situation, just give us a call at (651) 552-3681.

All mortgage lenders will pull a copy of your credit report, known as a Tri-Merge report, which will show your credit history and credit scores from the 3 big credit repositories (Experian, Equifax, and TransUnion).

For most program, we throw out your high score, throw out your low score, and base all credit decision on the lowest middle score of all applicants. This means if one borrower has an 800 middle score, and the other has a 600 middle score, everything is based off the lower 600 score. Simply put, a good credit borrower is not able to offset a weak credit borrower.

Many people these days view their credit scores on their credit card statements, or via online services like Credit Karma. Some even pay the credit bureau's to monitor and show them there credit scores.

But be aware, there is more than one type of credit scoring model, and your score may be different with the different models.

You can have a consumer credit score, a mortgage credit score, and auto loan score, and even a credit card credit score. While similar, each of these scoring models have slight variations in how they score you.

Most of the credit score you are able to view are based on the consumer score, which is the Advantage 3 score. Most mortgage credit score tend to come in a bit lower than your consumer credit score.

Bad credit is something that can happen to anyone. Unfortunately, for most people, bad credit and first time home buyer programs, and especially down payment assistance programs DO NOT go hand in hand.

There are too many programs to paint a broad picture, but here are some pretty standard guidelines:

• 640 or higher score required for down payment assistance
• As score drop below 640, many first time home buyer programs go away
• FHA allows for as little as 3.50% down with scores as low as 580 (but it's hard to get approved)
• Below 580 may be available in the sub-prime market, but you'll need no less than 10% down, and maybe more

Recent bankruptcies and foreclosures can also mean an automatic denial until you've met some minimum waiting periods.