The Place of the FICO Rating in Poor-Credit Mortgage Applications

If you are looking to get a poor-credit home loan or mortgage, you will need to get a handle on what the FICO credit scores mean. FICO, short for Fair Isaac and Company, is the premiere credit rating system that lenders use when it comes to rating your request for a home loan. Should your credit rating be less than sterling, this company will certainly know about it.The FICO FormulaFICO has a proprietary formula that it uses to score individuals. Since the formula is complicated and developed solely by FICO, Congress has allowed that the company keep under wraps the actual statistics used to arrive at the FICO score. Following are five considerations to keep in mind when applying for a poor-credit home mortgage loan.Consideration OneIn case it is not already obvious, the greater your FICO score, the greater your chances of getting a mortgage. The better your rating, the more power you wield in finagling a better interest rate with your lender.Consideration TwoYour FICO score hangs, to a great extent, on your scores from Transunion, Experian and Equifax scores. You can get one free credit report a year from each of these credit collection agencies. You should do so to see if there is anything unwarranted contained therein, and there often is. You should have any discrepancies expunged before you go home mortgage loan shopping.Consideration ThreeWith a FICO score under 500, the chances of getting a home loan are pretty slim. Take a look at the score ranges and see what they will determine.* 500-600Getting a home loan is possible, but be prepared to make a hefty down payment.* 600-640With these scores you can get a 100% mortgage and you do not have to make a down payment unless that is part of your financial plan.* 640-700A 125% home mortgage loan is possible with these scores. This could be useful if you wanted to make immediate improvements on the property.* 700 +These scores let you call the shots! You are going to get a great loan with very comfortable interest rates and repayment terms.Consideration FourThe FICO score is not the end all and be all of shopping for a mortgage. If you do not score with the first lender you have chosen, move on down the line. You may very well find a lender who will finance your homeowner dream. Folks with bad credit often do not understand how FICO credit ratings work before they go shopping for a home loan. Be as wise about the subject as you can be, especially if you have poor credit and if you think you may be working with a sub-prime home loan lender.Consideration FiveKeep your borrowing low. Better yet, make no credit applications before applying for a home mortgage. Wait until you have bought, or refinanced, the property before putting any large purchases on credit cards or other forms of credit. Your debt-to-income ratio can have a profound effect on any home loan chances for approval. This is true even if you have a score above 600. Whatever your situation, do not give up.