| Bad Credit Identify |
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The lending industry uses 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. If other criterion is strong enough, 30-60 days late on one credit card payment could be accepted by most of the lender.
About those that have more serious problem against their credit, will depending on how your credit history has been, lenders will typically place borrowers into the following credit categories, those are general guidelines to make lending judgment on the borrower's loan application, which are qualified by:
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| A-minus credit: |
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Credit problems within the last two years: Charge-offs, or collection accounts, of minor amounts (less than $500).Medical bills, including hospitalization and clinic visits, are usually disregarded by the lender. As for regular payments, the borrower can have no more than two 30 days late payments or one 60 days late payment on revolving or installment credit account.
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| B credit: |
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Credit problems within the last 18 months: Up to 4-30 days late, or up to 2-60 days late payments on revolving and installment credit account. 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. The outstanding collection accounts less than 4 years old have to be paid in full before your loan close. Bankruptcy or foreclosure that had been discharged or settled previous to the 18 month.
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| C credit: |
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Credit problems within the last 12 months: No more than 6-30 days late payments, 3-60 days late payments or 2-90 days late payments on revolving or installment credit. Open collections accounts and charge-offs can not exceed $4,000 and must be paid in full before closing. Bankruptcy or foreclosure that had been discharged or settled prior to the last 12 months.
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| Down payment requirements: |
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Some of the lenders usually lend only up to 80% appraised value to borrowers, so the borrower often has to have 20% equity or with a 20% down payment for a purchase.
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| Income requirement |
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A-minus and B-credit borrowers are allowed up to 45%-50% debt to income ratio (DTI). As for lower income borrower, some lenders do have "Stated Income" programs which do not require tax returns, W-2s, or pay stubs, but may require up to 6-month bank statements to verify income activity and asset reserve.
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| The Most Reasons Cost Bad Credit |
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High Debt Ratios
Late on Credit Card Payment
Late on Mortgage Payment
Foreclosures
Judgments
Tax Liens
Charge offs
Collections
Bankruptcy
Your credit report may with a history of foreclosure and bankruptcy, but you may still be able 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 can meet the specific guidelines for loan approval by a multitude of lenders specialized in the credit-damaged borrower. Depending on the extent of credit problems, borrowers with low credit histories may expect to pay higher interest rates for their mortgage. There still are a lot of lenders for the homebuyer or borrower can shop around to get the satisfied rate.
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