This is the first question your child will ask when he or she leaves babyhood and becomes a little person. The question will never go away. The answer I used, and probably thousands if not millions of others have used is "life isn't fair". However, it just doesn't cut it. Even when you go on to explain the law of averages and how it all balances out, it doesn't stop the question from being asked over and over again. Why am I using it here? Because when you read the article you will probably ask the very same question: “How come if they haven't been as good as I have, they get the easy path and mine is not that easy?” The easy answer is that borrowers with better credit generally get better rates.
However, where it used to be much more difficult for the credit challenged, non prime borrowers have it "made in the shade" these days as the lenders are competing for this profitable business. Generally, they can qualify for a loan a lot easier than a prime borrower who isn't the "creme de la creme" but isn’t below a 620 credit score. You need tax returns, or W-2's and a recent pay check, good credit (over a 620 credit score) an appraisal, some reserves and a spouse who mirrors your credit score, at least.
Non prime borrowers need a credit score above 500. They can have bankruptcies, foreclosures, charge offs, tax liens, late pays, collections and "hoof and mouth disease" and we do not care. They can have tax returns or not; W-2's or not; reserves or none at all, etc. Their spouse can mirror their credit or have a lot worse as long as it is above 500. In other words a pulse is necessary; everything else is optional (figuratively speaking).
Here is a few of the goodies we will do for them:
1. Let the high earner switch with the spouse to achieve a better credit score up to 100 points.
2. Qualify with their bank statements using their deposits, not their balances.
3. Have their property qualify with a AVM (automated value module), in place of an appraisal.
4. Use mortgage credit only to qualify. Good payment record on the mortgage is okay while we ignore all the late payments.
5. Avoid paying off any debt older than a year that isn't on title.
The list goes on but I think you get my drift. So now it is my turn to ask a question.
Why do you allow yourself to have bad credit if you own a home?
I could give you the answer, but I won't. You will appreciate it more if you answer it yourself. As they say in the sports world "the ball is in your court"! Crib notes can be found by clicking below. Good luck!
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.