Home Loans, Credit Repair and Down Payment Assistance

May 30, 2021

There are common questions about fixing your credit, and there are just as many questions in this area as there are in the area of home loan down payments. And sometimes those issues are actually interconnected. Do you know how?

For some borrowers, the question of raising a down payment is an issue of time. For others, no matter how much time is set aside to plan and save, there may still be a need for down payment assistance.

Down Payment Assistance Programs

That is where local down payment assistance programs come in. You may find state agencies (such as a state Housing Finance Corporation) willing to help with down payment grants, “silent second” mortgages, or other help.

But sometimes this assistance comes with requirements such as being a first-time borrower. Not always, but often enough that you should ask early in the application process what applies. Another consideration for these programs?

Some of them have FICO score minimums to qualify for the down payment help.

Are You Worried About Your FICO Scores?

What’s a borrower to do when worried about FICO scores? If you feel you may have a tough time qualifying for the FHA loan and/or the down payment assistance (where applicable), you should consider working on your credit long before applying for either the mortgage or the down payment help.

It takes time to repair your credit. If you do it yourself, you will need time to review and contest any items in your credit report that are not accurate, are signs of identity theft, etc.

 If you hire someone else to do it for you, you’ll have to wait out their process of challenging information in your credit report, getting a reply, and determining whether or not your credit will improve based on their methods.

Credit Repair Cannot Change Accurate Credit Reporting

One thing is clear, though; if you have any expectation that a credit repair agency (or you working on your own behalf) can remove accurate negative credit information just by challenging it, think again. No one can remove accurate negative credit data from your report. It must “fall off” the report over time.

And you do not need to pay a third party to begin working on your own credit RIGHT NOW. You can start by working on cutting down your debt ratio, reducing the amount of your outstanding credit balances (the target should be getting your credit cards down below 50% of their limit or better), and making all payments on time, every time for at least 12 months before you apply for a new loan.

Credit scores aren’t just important for getting your home loan approved, they can also be key factors in qualifying for some state-level home loan grant programs. Don’t cheat yourself out of this down payment help if you need it, work on your credit starting today.

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