Home loans

The days of no down payment and not-so-great credit are over.

First-time home buyers looking to buy through the government’s Federal Housing Administration loan program need a credit score of at least 600, said Mike Baker, manager of Fresno-based Resource Lenders.

The loans require a 3.5% down payment, he said.

For a conventional loan, lenders want a credit score of at least 680, Baker said. The greater the percentage of the house that must be paid for with the loan, the higher the credit score needs to be, he said.

A 20% down payment is preferred, though 10% down payments are common, he said.

Granville Homes’ preferred lender likes to see credit scores of 720 and above for a conventional loan, said sales manager Michelle Brunn.

Customers can get financing below that, but their options might be limited.

If a credit score isn’t good enough, lenders will look for “compensating factors,” Baker said. That includes getting the buyer to come up with a large down payment and show a long and steady work history.

The good news is there are easy and relatively quick credit fixes that can put buyers in a better position.

For instance, lenders don’t like to see customers who regularly go over 50% of their available credit on items like credit cards. Paying down to below 50%–and especially 30% — could cause their credit score to “skyrocket,” Baker said.

However, paying off accounts and closing them is not a good idea because it can cause scores to drop dramatically.

Granville offers buyers a monthly seminar to help improve their credit.

Brunn recommended that potential buyers meet with a reputable lender long before they make the decision to buy to come up with a game plan.

Article By Bethany Clough of RISMedia
February 2009
Copyright © 2009, The Fresno Bee, Calif.
Distributed by McClatchy-Tribune Information Services.

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