About Your Credit
At Landmark Financial we
that a client's credit report may be full of blemishes,
compounded with a
history of foreclosure and bankruptcy, but it is
still possible to get a loan for home purchase, refinance, or even
cash out of your current home. It doesn't matter whether you
have charge-offs, collections, or tax liens on your credit report,
as long as you meet the specific guidelines for loan approval.
Historically, the lending industry has
used specific categories to asses the credit risk of any particular
borrower. If the property checks out and you have sufficient
income, impeccable credit and the required down payment you are
considered an 'A' borrower. An 'A' borrower can walk into
almost any lender and get a mortgage loan. A borrower can fall
short in one of these areas and still be considered an 'A' borrower,
as long as the other areas can compensate for the weakness.
For example, a borrower that exceeds the required monthly
debt-to-income ratios (28% housing debt and 36% combined debt) could
offer a large down payment. Many lenders will also excuse
modest credit 'blemishes' if a reasonable explanation is provided
(i.e. job transition, medical problems). Being 30-60 days late
on one credit card payment is a typical blemish that could be
accepted by a lender.
But what about those that have more
serious marks against their credit? Depending on how tarnished
your credit history has been, lenders will typically place borrowers
into the following credit categories, which are qualified by time
Acceptable blemishes within the last two
years: Charge-offs, or collection accounts, of minor amounts (e.g.
less than $500 in all) are acceptable. Medical bills,
including hospitalization and clinic visits, are usually disregarded
by the lender. As for payment habits, the borrower can have no
more than two 30 days late payments, or one 60 days late payment on
revolving or installment credit.
Acceptable blemishes within the last 18
months: Up to four 30 days late, or up to two 60 days late payments
are allowed on revolving and installment debt. If the credit
ding is an isolated incident, a 90 days late payment is allowed
within the last 12 months. Charge-offs, or collection
accounts, which are isolated, insignificant, and less than $1,000 in
all, are acceptable. However, outstanding collection accounts
less than four years old must be paid. Bankruptcy or
foreclosure that had been discharged or settled previous to the 18
month time frame is allowed.
Acceptable blemishes within the last 12
months: No more than six 30 days late payments, three 60 days late
payments, or two, 90 days late payments are allowed on revolving or
installment credit. Open collections accounts and charge-offs
may not exceed $4,000 and must be paid in full. Bankruptcy or
foreclosure that had been discharged or settled prior to the last 12
months is acceptable.
A sporadic disregard for timely payment
standing categories puts the borrower in this class.
Open collections accounts, charge-offs, and judgments must be paid
through loan proceeds. The borrower who had filed bankruptcy
and had been discharged prior to the last six months is acceptable,
as well as the ex-homeowner who had his previous home foreclosed and
settled prior to the last six months. However, mortgage
payments cannot be longer than 90 days past due.