Are you trying to tap into your home’s equity, but your credit is holding you back? When you have a lot of home equity but bad credit, it can feel difficult to try to apply for a mortgage loan when people turn you down. Here at Independent Home Finance Inc., we run into this situation often, and have an arsenal of loan programs that can help our clients achieve their goals.
Some of these loan programs include:
- FHA cash out refinance loans for primary residences.
- VA cash out refinance loans for veterans.
- Private equity loans for self employed clients or rental properties.
- DSCR loans for investment properties.
Each loan program has unique differences, but with a wide array of lenders and programs, we work hard to find the best loan program for you. We also work with many lenders that offer lower credit score requirements, and have been able to help countless clients to get approved – wherever their credit was at.
A private equity loan is one of the most flexible loan programs when it comes to low credit scores, but also comes with important qualifying criteria. Oftentimes, the maximum loan to value ratios allowed for a private equity loan are 60% – meaning, that the total loan amount or liens on the property cannot exceed 60% of the home’s value. Furthermore, a private equity loan is a business purpose loan, meaning the home must either be a rental property, or the client is a self employed individual who intends to utilize funds to either start, grow, or maintain their business (this can be state specific, in certain circumstances). Meanwhile, an FHA or a VA loan, which are more traditional refinance options, often have lower credit score requirements than something like a conventional loan; but it also matters what is affecting your credit. Most traditional loan programs want to see 2 years of on time payment history if there is an existing mortgage, and if there are auto loan lates, this can also have an effect on an underwriter’s decision to approve the loan. Furthermore, FHA and VA loans are typically done on primary residences. So, if you have an investment property or are looking to turn your home into an investment or rental property, a DSCR loan or a private equity loan may be a better fit.
A question we often get asked is: Why have I been denied at some places, but can be approved with you? Ultimately, this boils down to the lenders that we work with. As an independent brokerage, we work with multiple lenders and private investors that each have their own qualifying parameters. For something like an FHA loan, two lenders may have different minimum credit score requirements – and this is called a lender overlay. For example, one lender may allow for a 500 minimum credit score on an FHA loan, but another may require a 600 credit score for the same FHA loan. This is because the lender has imposed their own requirement, above the actual loan program’s requirements, and can cause confusion for individuals who simply want to know what is possible or not. So, what may be possible with one lender may not be possible with another – and it is helpful to work with a brokerage that works with a whole team of different lenders and investors, to help find a program that you may qualify for.
In speaking with a loan officer here at Independent Home Finance Inc., it is our job to know guidelines and programs, and be aware of our client’s individual circumstances. So whether it is bad credit, or another unique issue that you’ve been running into, we may be able to help. Our team has over 20 years of experience, and we are constantly staying updated on new guidelines and new loan programs. Furthermore, if you are unsure of which loan program may be best for you, or what loan programs you may qualify for, we are happy to answer any and all questions. Reach out today for a free consultation, to see how we can help.