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Marc Roth Has Something Interesting To Tell You

Posted March 22, 2010 by Matthew Denton

Columnist writes about mortgages and low credit scores.

Who says you can’t get a mortgage if you have low credit scores? Not if you ask Marc Roth of BusinessWeek . While almost everyone believes that low scores can definitely hurt one’s chances of securing a mortgage, the founder of Home Warranty America states, “I checked with industry experts and here’s what I learned: Banks and mortgage brokers can still get you a mortgage of $417,000 or less at the best rates through Fannie Mae (FNM) and Freddie Mac (FRE) programs if you have a credit score as low as 660 and can put 20% down. Jumbo loans, those greater than $417,000, remain more expensive… Freddie Mac has refinance opportunities for those with mortgages of up to 105% of their appraised value. Fannie has them for up to 95%. The lower credit and low-or-zero-equity deals will cost at least a point or more above published rates. But it might get done.”

Roth also adds, “Believe it or not, even if your first and second mortgages total 125% of the appraised value, Fannie or Freddie may yet have programs that will refinance the first mortgage at a reasonable rate, as long as the second-mortgage holder doesn’t object. Since every scenario is different, I’m not suggesting that you refinance this type. I’m simply suggesting you weigh all reasonable options vs. assume that you have no choices.”

Roth may be right after all. Fannie and Freddie are always there to rescue the buyer who can’t find refuge from private lenders. But take note of Roth’s statements too. Borrowers will always have higher costs in this situation.

If you ask me, the best way to get a good deal is to improve your credit score first and refuse to gamble on mortgages that may turn out to be bigger regrets eventually. On the other hand, you could always try these tips before rushing to Fannie or Freddie.

First, be prompt on your rent payments. Some lenders can actually grant you with competitive rates even if your score isn’t that good. A secured job that supports your rent for at least a year is an advantage when applying for a mortgage.

Second, why not try a lease-to-own property? The property bust has brought too many homeowners into desperation to sell and thus, many have become determined to dispose their properties. Paying your rent where a part of it goes to down payment for the house will keep you safe from losing your house. Once you improve your financial standing, you can apply for a loan from a bank.

Lastly, earn more income. It’s as simple as that. Lenders would always want to see you rebuilding your finances again. That’s why it’s important that your job pays well. If it doesn’t, then go get a second job to support your needs. Do anything not just to make ends meet but to create a more comfortable financial standing.

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