Is the American Dream of Home Ownership One of Your Goals?


Are you still holding on to the American Dream of home ownership? If so, you probably know that obtaining a mortgage loan isn’t quite as easy as it was ten years ago. Banks have wisely become more cautious.

But it doesn’t mean you should abandon the dream – it just means you need to take the right steps to qualify for that mortgage loan. One of the first steps is to raise your credit score as high as possible.

Although factors such as your employment and debt to income ratios will affect your success, the #1 most important factor is your credit score.

Different lenders and different loan programs come with different qualifications, but the generally accepted minimum credit score for a FHA-backed loan is 600. FHA loans are popular today, especially with first time buyers, because they have a minimum down payment of only 2.5%.

Conventional loans, which are not backed by government agencies, require at least a 620 score.

Aim far higher than the minimums…

These minimum scores will not guarantee you a loan, nor will they get you a favorable interest rate.

Going into the process with minimum scores means you’re going to have a lot of hoops to jump through. It won’t be an easy ride. You will, of course, increase your chances by coming in with a larger down payment – at least 20% is best.

Interest rates are not the only cost affected by credit scores. Borrowers with less than 20% down are required to pay for mortgage insurance, and those premiums are higher when combined with low credit scores.

Aim for 680 or higher

A credit score of 680 is the unofficial minimum for borrowers who want some choice and flexibility, but don’t stop there. A score in the 740 range will get you the lowest interest rate.

Thus, if you dream of buying a home, but have had credit problems in the past, start now to raise your credit scores as high as possible.

The first step is to get a copy of your credit report from each of the three major bureaus. You’re entitled to free reports once per year at These free reports don’t give you your FICO scores, but they do show you what is included in your report, so you can check for errors.

Even the Fair Isaac Corporation admits that 75% of all credit reports contain errors, so don’t assume that yours does not. Some, such as a typo in your street address, are harmless. Others, such as someone else’s credit account being reported under your Social Security number, will drag down your scores.

The second step, of course, is to make sure all your payments are made on time and to make every effort to pay down your credit card balances. Rather than trying to pay off one card at a time, aim for bringing every card below 30% usage.

Don’t open new credit card accounts, and don’t go shopping for furniture or a car. In short, don’t give out your Social Security number or authorize anyone to check your credit until you’re ready to use it.

When you’re ready, we at the Mike Clover Group of Homewood Mortgage will be happy to talk with you and show you the loan programs available to you. We’ll also be happy to get you pre-approved, so you can shop for your new home with confidence.

You can reach us at 469.621.8484 or you can apply on line at

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 23477

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