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Low Credit Score Mortgage

So do you have a low credit score? Well, what's a low credit score you may ask? Well, if you dont have a 620 or higher credit score, you will not pass through the desktop underwriter (du) and you won't qualify for the best rates. (automated underwriting). You must have a 620. I have been watching du for many years, and you will not receive the ACCEPT response which is necessary unless you are at 620. This isn't the end of the world, it just means you won't qualify for an Fannie Mae or Freddie Mac type of loan.

So what are your options if  you don't qualify for a traditional mortgage? Well, if you can't get a du approval, you can get an FHA loan if FHA loans enough money for the county in which you are located. If your score is between 580 and 620, which is generally considered a low credit score mortgage, and you can pay the necessary PMI. Paying the private mortgage insurance may be preferable to going with a subprime lender. It depends on a few things.

Government loans, including FHA loans, have the lowest interest rates but you have to pay both the upfront MIP (mortgage insurance premium) as well as a monthly MIP. On a refinance, at the time of this writing, this monthly mip is .85% of the mortgage amount/12. FHA loans are obtainable with credit scores as low as 500. Pacific West Capital has access to these FHA loan lenders and can help you secure a loan if you qualify.

The other option on a low credit score mortgage is a subprime alternative lender. Now, PWC has lots of these available. So if you don't want the mortgage insurance, you can take a loan with a higher interest rate. I call them these "band aid' loans because they are typically not a long term solution. If you refinance your loan with one of these, you will pay off your existing mortgage which should help to raise your scores. If you are paying off anything else, that can also help and this is strongly advised. Then, in 6 months, you can refinance into a better type of loan. (Fannie/Freddie). For some however, this is a problem. A low credit score is not the only reason to take one of these loans, but another major reason is income documentaton. If your tax returns don't measure up and your debt to income ratio is over 50% DTI, you can take one of these alternative doc type loans which permit bank statements for qualifying. The rates are higher on these, obviously because they are riskier loans when you're not able to qualify with your tax returns.

If you are self employed, even with a low credit score mortgage, you can use 12-24 months of bank statements to document your income. You must be self-employed to do this. Or, you must have some type of side business if you are salaried receiving a W2. For more information, and/or to receive a quote on what is available in your specific situation, call us at 949-922-4200.

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