Banks have really tightened their credit standards.
“Credit crunch” is now a household term and it has hit main street hard
(not to mention King Drive). It is tough to qualify for a conventional
loan right now. The days of a “No-Money-Down” loan are long gone.
Now, to qualify for conventional financing, you will probably need at least
a 700 credit score, a 10% down payment, and a fully documented income.
Thank goodness for the FHA program.
This government program was put in place to help EVERYONE realize the
American Dream. FHA loans are NOT driven by credit score. So even if
you have “bad credit”,you can still obtain financing! Generally speaking,
if you have a 600 credit score, 3 1/2% down payment, and moderate
income, you can qualify for financing. However, all collections must be
paid in full. Of course, your income will need to support your loan amount.
Here’s the rule of thumb I use: Multiply your annual gross* household
income by 2.5 *Gross means ‘before taxes and deductions’ This is roughly
how much mortgage you can afford. Don’t include overtime or bonuses in
your income amount. Most lenders will not count anything except guaranteed
income. Also, you can’t count part-time jobs, self-employment income, or
commissions unless you have two years of W2/1099 statements to back it up.
For example, let’s say you and your spouse (or significant other) make a com-
bined 80K per year. If you multiply 80K times 2.5, you will come up with $200K.
This means you should be able to afford a home worth $200K. If you have a
lot of debt, this number will be less. If you don’t have much debt, this number
will be higher. If you don’t have a 600 credit score, start working on your credit now!
Boost Your Credit Score
Pull your credit report at www.myfico.com Get the product which includes your FICO
scores from all 3 credit bureaus. Your middle score is the one that will be used. This
is not the same as your average score. Example: lets say you have a 557 Experian;
a 668 TransUnion; and a 574 Experian score. The 574 score would be your middle
score, because it is not the lowest score, and it is also not the highest score. It is
the ‘in between’ or middle score.
You can dispute any inaccurate information online. To qualify for a loan, you will need
to pay off any collections. Next pay down your credit card balances. Your credit card
balances should be no more than 30% of your credit limits. After you do this, your
credit should greatly improve within a few months. Also, the 3 1/2% down payment can
be a gift from an immediate family member. If you don’t have any savings, this might be
a good time to hit up mom and dad 
You might also be able to borrow the down payment from your 401K. You may be able
to borrow up to $10,000 from your retirement plan, for a down payment, without getting
hit with a penalty. Ask your plan administrator for more details.
The downside to the FHA program, is that it generally only works for Single Family homes,
or 2 to 4 unit buildings. Condos generally don’t qualify for FHA insured financing 
See my next post on getting a condo approved for FHA financing.
So, in summary, you don’t need perfect credit to get financed. However, you will need
to have a 600 middle credit score, 3% down payment and a verifiable income. If you
have that, I can help get you financed! Then I can help you find the property of your dreams.
If you would like more information on Chicago Real Estate,
please send me an e-mail. You can also visit me online at www.773property.com
I am a licensed REALTOR that specializes in Chicago Real Estate.
Although I service all areas of Chicago, I work mostly on the South side.
My office is near the Bronzeville and Hyde Park neighborhoods.
My services include, but are not limited to, the following:
* Helping Owners Avoid Foreclosure
* Helping First Time Home buyers realize their dream
* Helping Sellers find qualified buyers
* Helping tenants lease luxury condo rentals
Until the next time,
Mark Killion
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!
Visit me online: www.773property.com
EQUAL HOUSING OPPORTUNITY
