Do you have money saved for a down payment?
If the answer is YES:
If you have a 20 percent down payment, go to any bank and get a “conventional mortgage” for 80 percent of the purchase price.
If you have a small amount for a down payment, go to a local bank or to one of the lenders listed below and ask about getting an FHA mortgage, which requires a 3.5 percent down payment.
If the answer is NO:
Call one of the lenders below and ask about getting a USDA Rural Development mortgage, which requires no down payment.
Rural Development mortgages are backed by the U.S. Department of Agriculture for the purpose of helping people buy in rural areas. To qualify, the house must be in a designated rural area – and all of Kent County, MD, qualifies. There are other guidelines, but the houses on Plum Drive meet all of them.
Do you qualify for 100 percent financing?
To qualify for any mortgage, you must earn enough to be able to afford the mortgage payments. The usual guideline for FHA and USDA loans is at least $25,000 to $30,000 annually for a single person or double that for a couple. NOTE: There is also an upper limit on how much you can earn -- around $46,000 for a single person, $92,000 for a couple.
Secondly, you need to have a decent credit score -- generally 620 or above. Don’t know what your credit score is? The easiest way to find out is to contact a mortgage lender and ask to be pre-qualified. They will take some basic information, check your credit, and give you an answer right away as to whether you qualify for a mortgage. There is no charge for this service.
I highly recommend these mortgage lenders, both of whom are very familiar with government loans:
Dinah Reardon, First Home Mortgage
driordan@gofirsthome.com
Office: 410-758-6632
Cell: 410-490-3342
Phil Davis, Mortgage Network Corp.
Pdavis@mortgagenetwork.com
Office: 410-398-5607
Cell: 302-528-2144
Fax: 866-310-1767
www.phildavishomeloans.com
How to check your credit
If you would prefer to check your credit on your own before you contact a lender, here’s how to do it.
Go to www.annualcreditreport.com and get copies of your credit report from the three credit-reporting agencies. Read them carefully to see if the information is correct. If you find errors, try to get them corrected ASAP (the website has information on how to do this).
Be aware that there are many “free credit report” sites on the web, but the only one which is backed by the government and highly regulated is Annual Credit Report. Most of the “free” sites are actually trying to sell you something. This is the only one that is directly linked into the three big agencies and gives you a free report.
However . . . it will not give you your credit score for free. A credit REPORT is just that – a long report showing who you owe money to, whether you have made payments on time, how often you have applied for credit, that sort of thing. A credit SCORE is a score based on how well you use your credit. Most lenders never even glance at the entire report, they just look at the score. Anything under 600 is bad, 600 to 700 is OK, over 700 is good, over 800 is excellent.
There are three ways to get your credit score for free:
1. Contact a lender as explained above and let them check your credit. They will have to pay a fee of about $20 but they usually don’t charge you up front. If you do wind up getting a mortgage from them it might be added to your closing costs later.
2. Go to a site like www.freecreditreport.com and sign up for their service, which costs about $15 to $20 per month. Most of these sites have a trial period that allows you to get your score for free and gives you 30 days to cancel. As long as you get the score and cancel immediately, it is “free” – just be sure to watch your credit card bills and make sure you’re not being charged for an ongoing membership. (I believe the government site www.annualcreditreport.com also gives you a chance to pay for your credit score when you are re-directed to each of the three agencies.)
3. Go to www.creditkarma.com and register for your free score. Unlike the other sites, this one truly is free. It is not as accurate, but they generally give you a fairly good guess within about 10 point either way. (They make their money by trying to get you to sign up for credit cards and other offers. Try to put blinders on and ignore all these offers!)
Additionally, if you have been denied credit within the past 60 days you have the right to see the credit report and credit score. For example, if you applied for a loan to buy a car and were turned down, go back to the dealership and tell them you want to see your credit score.
Don’t have any established credit? Assuming that you don’t qualify for a regular credit card or auto loan, the easiest way to “get in the system” and get a credit score is to apply for a secured credit card. This means you deposit a certain amount, usually at least $100, with the credit card company and then you get a credit card that allows you to draw against that amount. Even if you just spend a few dollars each month and then pay it back, this will build up your credit.
One last word . . . be very careful with credit repair companies. They are almost always a rip-off, charging you to “fix” your credit and in fact being no help whatsoever. There is no easy fix. Just try to pay down your credit cards, make regular payments, and pay on time. After a few months these good habits will make your score start to go up.
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