Loan Options for First Time Home Buyers & Credit Scores!
No/Low Down Payment Options for Home Buyers
What Loan?? What is my credit score??
Buying a home for the first time can be stressful and nervous. So many moving parts. The best advice is to hook up with a Realtor you trust and a Lender you trust. Most often, the Realtor will be able to refer you to a few lenders to choose. Buyers need to understand credit reporting and loan options with no or low down payment requirements. USDA and FHA tend be the most popular options.
Understanding the Credit Score for Home Loans
First time buyers sometimes don’t even know they can even qualify. They assume their credit score is not very good or that they can’t cave up enough money. The factors are necessary, but these Soon-To-Be Buyers needs some education on the process. When applying for a home loan the buyer will complete an application and provide the lender necessary income documentation & asset information. The lender then pulls a tri-merge credit report. This is important as it is pulling the Equifax, Transunion and Experian. This is very important because most banks, car loans, credit cards only pull one bureau for their qualifying purpose. So, this means when your buyer is getting their monthly credit score update from their bank or credit card company, they may only be getting 1 score by 1 bureau. A mortgage lender will have all 3. They then ignore the lowest score reported and the highest score reported. They use the middle score. Keep in mind, the highest and lowest bureau reporting may not always be the same for you or another buyer. Each creditor reports to different bureaus. So the buyers middle score could be from Transunion and their spouses middle score could be Experian. Never rule out you have “bad credit” or “amazing credit,” let the lender be the judge on that.
Buyer Loan Options with No/Low Down Payment
There are some great loan options for first time buyers that require No or Low down payment option. So, all that money the buyer things they have to save may not be the case at all. USDA is a government loan that require No Down Payment for rural areas. They have a cap on price for the different counties and they have a income grade for number of people in the household. This is not a low income loan, as the income caps are fairly comparable to the income in the different counties. Depending on the market, it is possible to get the seller to pay for closing costs. Which then, in return, allows for very little money by the Buyer.
Now there is, also, the FHA government loan program. This one has more flexibility with lower credit scores and income and price caps. It does, however, require 3.5% down payment. This down payment can, also, come as a gift from a family member.