You may be experiencing the frustration of talking to banks today, it seems like the lending standards and credit scores required to qualify change every day. Home prices are more affordable than they’ve been in decades and mortgage rates are at all time lows. Even if you were able to qualify 3 years ago, and even if your credit score has not changed, you may not be able to qualify today. There are 2 main reasons why people are not able to buy a home, but there is also hope and the American dream of home ownership might still be within your reach.
You may be one of millions of people who have recently been turned down for a home loan by the bank. Usually, the banker will tell you why you were disapproved and sometimes they will give you a list of things you need to do so he or she can give you a loan. Most people, however, do not have a plan for keeping on track and many end up frustrated and no closer to their dream of owning a home. One of the most common reasons good people get turned down for a loan is because they have less than perfect credit.
1. Less Than Perfect Credit.
If you notice, I didn’t say “bad credit.” A few years ago, banks were lending to everyone who wanted a loan. Banks were lending to people who had credit scores in the mid 500s just a short while ago. Just recently it was announced that the minimum credit score, yes the minimum for a FHA backed mortgage is 640. But, even if you have a score in the mid to high 600s, you may still be required to put down a hefty down payment. A score of 720 or higher is considered good credit, and is what’s required for a low-down payment loan today. There are many reasons that credit scores can become less than perfect. Maybe you have had a bad event in your life such as a medical emergency or a divorce. These events may be unavoidable, but wreak havoc on a credit score. Maybe you pay your bills on time, but you have had to run up the balances on some credit cards so the bank runs its formula and tells you that your debt to income ratio is too high. Maybe you were a victim of the economic recession and lost your job, but you’ve been diligent and found a new job, but because of being out of work you missed some payments on some of your accounts. The banks don’t look at your situation and give you a break, they run your credit through their automated system and if the result comes back less than perfect, you don’t qualify.
2. Not Enough Cash
Even if you do have perfect credit, 100% loans are hard to come by today. You see, banks got into a lot of trouble with the easy lending standards of the past by loaning too much money on houses. Banks used to loan 90%, 95%, 100% and even more of the value of the home that secured the mortgage, and then when the economy turned and people had trouble making their payments, the banks had to take big losses on these loans. Lending standards have changed, the pendulum has swung far back the other way and banks are more heavily regulated than ever before. If you do not have an extra 5 to 10 grand burning a hole in your pocket and a credit score in the mid 700s, you’re going to be hard pressed to qualify for an average, modest home for your family.
Many people today face this dilemma. They may have the cash, but not perfect credit. Or, they might have the credit to qualify, but the bank is asking for too much money as a down payment. Maybe they are even struggling with both. There is another option that many people don’t realize. We offer our tenants a rent-to-own program that can help many people solve the two most common problems keeping them from their dream of home ownership. With Quelle Properties’ rent-to-own program we offer low move in costs, but more importantly all rent deposits such as the security deposit are credited towards the purchase. Also, to help you to build that down payment required by the bank, we credit $100 every single month for on-time rent payments, which ends up giving you an extra $1,200 towards your down payment in just one year. We also provide education on how you can increase your credit score with some simple steps. You see, no one teaches us this credit game in school, but it is something that affects our entire lives. It is like coming onto the field in the middle of a football game without knowing the rules. It is impossible to win a game you don’t know how to play. Once you know the rules, however, you can not only compete, but you can win!