We would rather spend a year—or even two years—working with you to improve your credit than save time and send you to a mortgage broker. Follow our suggestions, and you’ll be able to get that mortgage from a real bank at their regular rate.
- It’s better and cheaper to get a mortgage from a bank than a mortgage broker. If a federally insured bank is offering a standard interest rate of, say, 5% on a 30-year mortgage, a mortgage broker has the right to increase that amount and may charge you 2% more for the same 30-year mortgage.
- Most prospective homebuyers go to a mortgage broker because they know—or they believe—they can’t qualify for a mortgage from a bank. We would advise trying for a bank loan before going to a mortgage broker. We will connect you with our banking partners, and they will tell us why you would or wouldn’t qualify for a mortgage from a bank.
- If you have already been turned down by a bank, we will help you find out why. (See note below.) Maybe the reason was a poor credit history—usually caused by late payment of bills—which is a common problem. If that’s the reason, we’ll suggest you work with us on improving your credit history for the next six months or year to see if you can raise your credit score enough to qualify for a bank loan.
- Paying your bills on time automatically goes on your credit report and improves your credit history. Over the next year, maybe you get a second job and pay off a credit card bill or make an arrangement with a major creditor. That creditor then writes to the credit bureau saying you’ve cleared the debt. We might also advise you to pay your bills electronically so that they are all paid on time (between the first and fifth of the month). All those things can improve your credit score.
- Having a realistic budget is extremely important. Before applying for a loan or a mortgage, it’s important to know how much you are able to pay every month.
Mr. and Mrs. Jenkins, for example, made some changes in their lifestyle to improve their finances before they tried to buy a home. When Mr. Jenkins first came to Bridge Street Development Corporation, his wife did not work outside the home; now she does. They also started renting out a two-bedroom apartment in their brownstone. When it comes to tenants, keep in mind that they can be a helpful source of income, especially in tough economic times, but homebuyers should not depend on a tenant’s rent to cover the monthly mortgage payment. Tenants may pay late or get behind in the rent. Be careful not to put yourself in a position where if the tenant doesn’t pay the rent, you can’t make your mortgage payment.
To take a look at Bridge Street Development Corporation’s course offerings, including the First-time Homebuyer’s course, see our upcoming events.
Note: Since the Equal Credit Opportunity Act was implemented in 1974, federal regulation: (1) prohibits a credit-scoring model that considers race, religion, national origin, sex, or marital status; (2) requires that credit-scoring models be empirical and statistically sound; and (3) mandates that if a lender denies a loan application, the lender must give the borrower specific reasons for the denial, such as “too many delinquencies of 60 days or greater.”(Simply saying the borrower was denied a loan because of a “low credit score” is not specific enough.)