Is “Bad Credit Mortgage Loans Guaranteed Approval” Safe?

When it comes time to purchase a home, finding a lender that gives you the best options is important. Having good credit simplifies the process and allows you to buy a home with a good interest rate, leading to less cost in the long term. However, having bad credit is not necessarily a hindrance to having your own home. You can own the home you’ve always dreamed of!

Explaining the credit scores

Lenders use credit scores to determine how trustworthy a borrower is or how likely they are to pay back the money loaned to them. The higher a credit score is, the more likely they are to loan money to the borrower.

FICO scores range from a low of 300 to a high of 800. How your credit score is determined is based upon a number of factors, including how reliable your payment history is, how many credit accounts you have opened, how old the credit accounts are, and how much debt you have.

Credit Score Chart
Very poor: 300-579
Fair: 580-669
Good: 670-739
Very good: 740-799
Excellent: 800-850

If your credit score is low, it may be beneficial for you to monitor your credit with a credit monitoring service, giving you tips and advice for improving your credit. If your credit is really low and you are struggling to improve it on your own, enlisting the help of a credit repair company can help. Taking steps to improve your credit before purchasing a home will ensure you get a better interest rate, which affects the amount of money you will pay over the life of the loan.

Bad credit mortgage loans with ‘guaranteed approval’

Many times, someone with bad credit is desperate to find a solution to purchasing their own home and they stumble upon mortgage loans that guarantee approval. This is a red flag because, under federal rules, a lender must verify the ability of a borrower to repay their mortgage. There is no guaranteed mortgage loan, whether you have good credit or bad credit.

While there is no guarantee, there are programs that offer bad credit home loans. It is possible to obtain a home loan with bad credit—so, if you’ve been looking around with no luck, don’t give up yet. There are several companies and loan programs available to people with less-than-stellar credit.

Lending Tree

Lending Tree is not a traditional lender. Rather, they are a service that helps people with bad credit find a lender by submitting the borrower’s information to a variety of lenders.

Pros

• Lending Tree boasts a simple four-step process.
• They eliminate the need to look at each lender’s requirements, allowing the borrower to simply compare and contrast their options.
• There is no fee to use their service.
• Potentially better rates because the lenders compete with one another to offer better rates to the borrower.

Cons

• They submit offers to all their lending partners, which leads to the potential of unwanted offers and spam.
• Rates go as high as 29% APR, which leads to a much higher cost for the borrower for the life of the loan.

PNC Bank Mortgage

Pros

• PNC considers non-traditional credit history, such as rental payment history to approve a loan.
• Their website has updated mortgage rates so that a customer is never blindsided by current rates.
• They offer a variety of loan programs including VA and FHA loans.

Cons

• Their application is not available entirely online, meaning it must be completed in person.
• In-person service is unavailable in some states, which means that PNC will not work for everyone.

Wells Fargo Mortgage

Pros

• Wells Fargo has their updated rates posted on their website. They are updated daily.
• They offer a variety of loan programs including FHA, USDA, and VHA loans.
• Their website boasts many educational products including videos and articles that will help you obtain a mortgage and understand the process.

Cons

• Their trust has been eroded because of government scandals.
• New applications for home equity lines of credit have been suspended because of COVID-19.

New American Funding

Pros

• They offer a variety of loan programs.
• You can install their app on your mobile device for convenient mortgage management.
• Their website offers calculators and a variety of other mortgage educational resources.
• Their mortgages are bilingual, making it easier for a native Spanish speaker to purchase a home.

Cons

New American Funding programs are not available in some states, such as Hawaii and New York.

Navy Federal Credit Union Mortgage

Pros

• Navy Federal Credit Union offers loans with no down payment, making it easier for first-time homebuyers to purchase a home.
• They offer a variety of loan services include VA loans.
• They offer an online application for pre-approval making applying for a mortgage simple and easy.

Cons

• The website does not offer customized rates based on your credit score before you apply.
• Their mortgages are meant for military members or their families only.

CITI Mortgage

Pros

• CITI Mortgage offers customizable loan rates on their website based on credit and other factors.
• They offer low down-payment mortgages, which is beneficial for first-time homeowners.
• Their fees and rates are lower than many other lenders.

Cons

• They charge a fee for applying for a mortgage through them.
• They require you to complete the mortgage application with a loan officer, meaning the loans cannot be applied for online only.

FHA Rate Guide

Pros

• FHA loans are easier to apply for because they have less stringent requirements than a VA loan or USDA loan.
• They offer low-credit score FHA loans which allow people with bad credit or low credit to apply for a mortgage with a low down payment.
• Homebuyers can apply for an FHA loan with a credit score as low as 500
• Most banks offer FHA loans.

Cons

Buyers with poor credit scores are still subject to higher interest rates.

Government-backed agencies

Government-backed loans are less risky than subprime loans and they boast lower interest rates and lower down payments. These loans are better for someone who has bad credit and is looking to become a homeowner because the requirements are less stringent than a conventional home loan.

VA Loans

VA loans are reserved for active-duty military members and veterans. These types of loans are guaranteed by the Department of Veteran Affairs. VA loans typically have a lower interest rate and can even be acquired with a 0% down-payment in some cases. These loans are especially beneficial for people with a credit score of 620 or higher, but they can be acquired with a credit score of 580 or above in some cases.

USDA Loans

A USDA loan is a loan that is typically offered to lower-income home buyers that are looking to purchase a home in a rural area. These loans boast a 0% down payment. The credit requirements for a USDA loan are a little bit higher, generally requiring a score of 640. However, there are exceptions, so if you are interested in a home in a rural area, a USDA loan might be a good fit.

FHA Loans

An FHA loan is a government-backed loan through the Federal Housing Authority. The loan is meant for borrowers that have low credit, usually around 580 or above. As long as the borrower can provide a 3.5% down payment on the house, they’ll likely qualify for an FHA loan. The requirements for an FHA loan are less stringent than those for a VA or USDA loan making them a good choice for low-credit borrowers.

It is absolutely possible to find the right house for you, even if you have low or bad credit. There are a variety of tools available for you to increase your credit score. If your credit score is still lower than a conventional loan requires, you can search for a loan that is less risky and government-backed. Another option is to improve your credit score so you can enjoy the benefits of a lower interest rate and better terms for your home mortgage.

If you’re ready to start the home buying journey, reach out to the experts at Hero Home Programs. They will utilize their expertise to find grants and rebates for home buyers, as well as set you up with service vendors at reduced rates. Contact us today and we could help you save thousands of dollars on your home purchase.

Original post here: Is “Bad Credit Mortgage Loans Guaranteed Approval” Safe?

Your Guide to the USDA Loan Process

When you’re looking for a home loan, the options available can feel overwhelming and sometimes even confusing. Many people aren’t even aware of all of the different options available to them. The USDA is a government department that most people don’t associate with home loans, yet they are just as invested in rural development as they are in the food pyramid. We’re going to take a look at the USDA Loan loan process and FAQs and help guide you through the basics of this lesser-known loan process.

What is a USDA loan?

A USDA loan is a mortgage loan that makes home purchases more affordable for those living in rural areas. The loan is backed by the United States Department of Agriculture. Because of the government backing, lenders can offer a lower interest rate to qualified buyers and waive a down payment.

The USDA loan traces its roots back to the Great Depression when then President, Franklin D. Rosevelt, committed to building up rural America. The initial Executive Order that created the branch known today as USDA Rural Development was signed in 1935.

How does a USDA loan work?

A USDA loan can be acquired by those with the appropriate qualifications for both 15 and 30-year payback schedules. There are no official limits on the mortgage amount. This amount is determined by income and fair market rates in your location.

Some advantages of USDA loans include:

• No down payment required
• Guaranteed fees
• Competitive interest rates

Disadvantages of USDA loans include:

• Location-specific (not all areas qualify)
• Extra red tape and/or waiting times

This is a government-backed loan, so while there are advantages in the lower rates, you do have to meet several factors to qualify and may have to wait a bit longer for processing than conventional loans.

Different types of USDA loans

Guaranteed loan

A guaranteed loan with the USDA is a loan offered by a local lender but is at least partially insured by the USDA if the buyer defaults on the loan. This allows lenders to offer modest loan terms to lower-income individuals that don’t have the best credit scores. To be eligible for this kind of loan, the buyer’s adjusted household income cannot exceed more than 115% of the median income in their desired designated rural location.

Direct loan

A Direct USDA loan is when the USDA funds the borrower directly. They become the lender, rather than a bank. These loans are offered only to qualified low or very-low-income families.

Home improvement loan

These loans are offered to low-income Americans to assist in home renovation or repair. This loan may be combined with grants that don’t need to be repaid.

Applying for a USDA Home Loan

Eligibility and Requirements

To qualify for a USDA guaranteed loan, you must meet the following requirements:

• Be a US citizen or a US non-citizen national or qualified alien
• Demonstrate a willingness to meet credit obligation in a timely manner
• Agree to use your home as your primary residence
• Purchase a home that meets all criteria set by the USDA
• Have an income that qualifies as “low” income or below in your intended purchase area
• Not have been debarred or suspended from participating in other federal programs

To qualify for a USDA direct loan, you must meet the above qualifications PLUS:

• Lack of access to safe, sanitary, and decent housing
• Are unable to secure loans from any other source on reasonable terms that you are able to meet

The USDA loan process

Prequalify with a USDA-approved lender.

The first step in the USDA loan process is to prequalify. Your lender will review your financial history, work history, and credit to decide whether you are qualified for a USDA home loan.

Apply for pre-approval.

Once you’ve been deemed eligible for the loan, you then must apply for pre-approval. Your lender will look over the same documentation as before to determine the mortgage amount they feel comfortable lending to you. Make sure to ask questions and read all documentation.

Find a USDA-approved home.

The next step is to go house hunting in a USDA-designated area to find an affordable home that meets your needs.

Sign purchase agreement.

When you find the house that’s right for you, it’s time for your lender to complete a final review and sign to associate the mortgage with the property.

Go through processing and underwriting.

The loan will be processed at this point, including the final USDA approval of the property. Again, make sure to read all paperwork and ask any questions that you may have about the process.

Close your loan.

This is the point where you sit down to sign all of the final paperwork. Typically it will only be a few days after this point that you can move into your new home.

How long is the USDA loan process?

When working with a lender for a USDA loan, you will typically find that the process takes four to six weeks. A backup of files because of high volume could cause this period to be extended, but this is rare.

While not available to everyone, USDA-backed loans are an excellent resource for those who have low to very low income and want to purchase a home in rural areas. The USDA home loan program can open up new possibilities for those who may not otherwise have access to safe and affordable housing.

If you’re ready to start your journey to homeownership and have considered a USDA home loan, reach out to the experts at Hero Home Program. They work tirelessly to find local and federal grants to assist with your home purchase and also work alongside local vendors who will help you save money on your home purchase.

Original post here: Your Guide to the USDA Loan Process

Importance of Bank Statements for Mortgage Applications

When you apply for a home loan, you find yourself combing through a lot of financial documentation—tax returns, pay stubs, bank statements, and the like. But why all the scrutiny? The short answer is that mortgage lenders have strict standards for lending money because they aren’t out to lose money. They want to be sure that any payee will not default on their home loan because of lack of funds.

While lenders are careful about how they lend money for their self-interest, this caution is beneficial to the home buyer as well. A buyer doesn't want to lose their house because of any miscalculation in available funds.

Why do mortgage lenders want bank statements?

Bank statements are an important piece of accessible assets. A bank statement is a monthly (or sometimes quarterly) summary of your banking activity. Even with other documentation, a lender will want to analyze this information to determine several things. They want to know that:

• you have a regular income that comes from a known source
• you have enough available for at least a few months of mortgage payment
• the money you have has been building for a period and not just a recent deposit

These markers indicate that the money in your account is not laundered money or from a fraudulent source. It also shows that the buyer is not using another loan to qualify for the mortgage.

Mortgage lenders require bank statements to be provided over a period of time. They will scrutinize these documents to ensure that the potential payee is a good risk and will be able to make prompt and regular payments on their home loan.

The twelve-month bank statement will be examined for “sourced and seasoned” income, which refers to monies from legitimate sources and have been present for a period of time. This may be required if there are red flags in the sixty-day bank statement.

A sixty-day bank statement is the standard period examined. Lenders will make sure that there are no overdrafts or bounced checks and that the money looks good. Even a five-dollar overdraft can disqualify an applicant, depending on the lender.

How do lenders verify bank statements for mortgages?

Each mortgage lender has its own process for document verification. Some work with physical documents, while some will manage them electronically. Expect that your lender will follow up with your bank to validate the statements after you’ve provided them.

They will check the account for what is called “proof of deposit.” This is a determination that enough money has been deposited or has accumulated in the account to cover the property’s down payment the applicant wishes to purchase.

If you have received a gift of money from a family member to help qualify for a mortgage, realize that this will also be scrutinized. This gifted money for a down payment must be thoroughly documented through transferral of funds, typically with a statement or withdrawal and deposit slips. Remember, large amounts quickly deposited cause red flags.

Things lenders look for from your bank statements:

• “Proof of deposit” (enough funds for the down payment on the desired home)
• Sufficient funds for the home
• Consistency of funds (aka “seasoned” income)
• Funds are from known sources (aka “sourced” income)

Things that shouldn’t be in your bank statements

• Bounced checks
• Overdraft (even one can disqualify you from some lenders)
• Large undocumented deposits
• Regular payments with irregular activities

Can you get a loan without a bank statement?

While some mortgages may allow you to apply without W2s or pay stubs, bank statements are always required by mortgage lenders. These companies lend large amounts of money to individuals, and they must be sure that each one is a good risk that won’t default on the loan. They must have a full financial picture to ensure that their investment is safe, and bank statements are the best way to determine this.

Understanding that the investigation of bank statements will be a part of the loan application process, take great care when getting ready to apply for a mortgage that your financial house is in order.

Have all required documentation gathered and ready to share with your lender. Know the cost of your “dream home”, and be sure that you have the money to cover the down payment, and to easily pay the monthly mortgage payment. Don’t make any drastic changes to your funds, and be sure to document any gifts you may receive from generous family members. Be very careful to spend wisely, and ensure that there are no overdrafts on your bank account.

Homeownership is a major and important step in life. Approach it with appropriate reverence, and understand that lenders are laser-focused on their own interests.

Although each lender is different in their qualifications, don’t expect lenience. You are an investment to them, and with careful planning, you can be a good risk and able to make your own investment in turn.

Are you ready to make the dream of homeownership a reality? Contact the team at Hero Home Programs™. They work hard to save you thousands of dollars on your home purchase. They can refer you to local vendors, search out federal grants, and help you on your home buying journey.

Original post here: Importance of Bank Statements for Mortgage Applications

A Quick Guide to a Bank Statement Mortgage

A bank statement mortgage, also known by the names self-employed mortgage or alternative documentation loan, is a mortgage that enables an applicant to secure a loan from a lender without using traditional documentation such as W-2s or tax returns. Instead, the applicant submits 1-2 years’ worth of bank statements and a few other qualifying criteria that will be discussed in this article.

What are the advantages of a bank statement mortgage?

A bank statement mortgage is an ideal option for those who might not qualify through traditional methods due to the nature of their income. Advantages of the bank statement loan include the following:

• Pay stubs, W-2s, or tax returns are not required
• Usually have high loan limits
• Often allow for higher DTIs (debt-to-income ratios)
• May be used on a primary residence and also on second homes or investment properties
• An applicant can qualify with as little as 10% down

Different types of bank statement mortgages

Personal bank statement loans

A personal bank statement loan is for an individual applicant who needs this special loan because of an irregular income but can pay on a mortgage. These generally fund primary or secondary homes but may also apply to investment properties.

Business bank statement loans

A business bank statement loan is offered to a business and is meant to fund business-related purchases, such as properties, offices, warehouses, and investment properties.

One-month bank statement loans

These are far rarer than the other two categories of bank statement loans. In some special cases, the applicant qualifies under strict credit and down payment requirements, the bank may grant a loan based on bank statements covering only a month. One-month bank statement loans are not offered by many lenders. It is basically a no-income documentation loan where the bank statement activity is what gets scrutinized. If the bank statement shows unusual activity, such as a large income but simple living, the loan may be denied.

How does a bank statement mortgage work?

While a bank statement mortgage can benefit those who want loans without having to submit tax info or pay stubs, they must have a slew of other information ready to share with loan officers. Requirements change lender to lender, but be ready to submit the following information.

Requirements

• 1-2 years worth of personal or business bank statements
• A credit score of 620 or above (this will vary by lender)
• A two-year history as a self-employed person
• Enough ready cash to cover several months worth of mortgage payments
• Verification of assets (i.e., mutual funds or 401k)
• Letter from tax accountant verifying business expenses and confirming that applicant files as an independent contractor

This information may be uploaded into digital mortgage software or synced with your bank to the lender. They are then approved through a manual underwriting process that can take up to 30 days to process. More complicated cases may take up to double that time.

Who would benefit from a bank statement mortgage?

Certain professions are set up in such a way as to be unacceptable for their workers who are not qualified for conventional or FHA loans because the income reported on their tax returns don’t reflect the true earnings. Deductions and business write-offs can skew the true picture. Those affected by this discrepancy can include freelancers and consultants, lawyers, doctors, small business owners, real estate agents, and investors. Bank statements will give a clearer picture of their true income and ability to pay on a mortgage loan.

Conclusion

A few downsides to a bank statement mortgage loan include the need for a larger down payment and potentially higher interest rates. They are also not offered by every lender. Some small business owners may qualify for conventional loans if they have been in business for over two years and have seen steady growth since. But a bank statement mortgage loan is available to newer small business owners.

A bank statement mortgage loan may also be applied to existing homeowners to refinance their mortgages. This can be a useful option to those who have left the traditional workforce since their initial home purchase but want to take advantage of home refinancing benefits.

Homeownership is an important investment and the best way to build wealth for most Americans. For those whose professions do not allow them to qualify for a conventional loan, or for those who are seeking a lower interest rate on an existing home, bank statement mortgages offer an excellent alternative to assist in the purchase of a home or business property.

If you are ready to pursue your dream of homeownership, reach out to the specialists at Hero Home Programs™ today. Our team is proud to offer access to local grants, rebates, and vendors who will assist you on your home buying journey. On average, homebuyers who use Hero Home Programs™ save thousands of dollars on their journey. Contact us today to learn how we can help you save money on your home purchase.

Original post here: A Quick Guide to a Bank Statement Mortgage