Can I be Approved for a NJ Mortgage with a Bad Credit Score?

NJ mortgage

A lot of people with a bad credit score assume it is impossible to become a homeowner. A low credit score can definitely make it harder to get a new credit card or any type of loan, including (and especially) a mortgage loan. If the one thing standing between you and home ownership is your credit score, don’t give up hope. It is possible to get approval for a NJ mortgage with a low credit score.

What is considered a “bad” credit score to mortgage lenders?

Different lenders have different criteria for loan applicants. The lower your score, the more likely it is that potential lenders will see you as a risk. If your score is somewhere in the middle—between 620 and 740 (approximately)—there is a little more wiggle room. While you will likely face higher interest rates and be restricted in how much you can borrow, you should still be able to secure a mortgage loan without much issue. Generally, if your score is under 620, you will not be able to get a loan from a traditional lender. But that doesn’t mean you have no options for getting a loan; it just means you will have to go through less traditional lenders.

Private Lenders

One option for borrowers with low credit scores is to go with a private lender. Mortgages through private lenders often come with higher interest rates and more substantial minimum down payments for borrowers with bad credit. You also may have to do a little more work with a private lender, like providing additional paperwork that is typically not required with a traditional lender. It’s important to do your due diligence when going through a private lender. Shorter payback periods and higher interest rates can make it difficult to make your monthly mortgage payments. Make sure you will be able to make timely payments in full for the duration of the loan.

FHA Loans

Another possibility is a Federal Housing Administration (FHA) loan. If your credit score is at least 580, you can qualify for an FHA mortgage with 3.5% down. With a score between 500 and 580, you will need to put at least 10% down. The cutoff for credit scores with an FHA loan is 500. Downsides to an FHA loan include: high interest rates and a mortgage insurance premium of 1.75% as well as monthly insurance premiums. If you pay less than 10% of the loan for your down payment, you will have to pay these monthly insurance premiums throughout the life of the loan.

Mortgage Tips for Low Credit Score Borrowers

Sometimes it’s possible to make up for a bad credit score in other ways. You can offset the risk of the loan by offering to pay a bigger down payment. While first-time home buyers typically put down 6% or less, making a 20% or more down payment could encourage lenders to approve your application despite a poor credit score. Plus, the more money you put down, the lower your monthly payments will be.

Another option is to enlist the support of a co-signer. If you have a close friend or family member with a great credit score, they could help you secure a mortgage loan. This is not a commitment to take lightly, though. While the mortgage is in your name, the co-signer will be equally responsible for any payments. This means if you miss a payment, their credit will be negatively impacted. Working with a co-signer requires a lot of communication and trust.

#1 Way to Own a Home with Bad Credit

If your goal is to buy a property but your credit score is poor, the best thing you can do is take the time to rehab your credit score. The higher your credit score, the better chance you’ll have of working with a traditional lender. Working with a traditional lender means your down payment, interest rate and monthly payments will be lower. Regardless of your situation, Veitengruber Law can help you determine which path to home ownership is best for you.

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Filing for NJ Bankruptcy isn’t the Only Solution to Unpaid Debt

nj bankruptcy

School loans, medical bills, mortgage payments, credit card bills, auto loans, past due utility bills, overdue taxes: what do they all have in common? They’re all forms of debt. If you’re dealing with multiple types and sources of debt, you know that they can deplete your bank account and tank your credit score. If the concept of getting out of debt feels like scaling Mt. Kilimanjaro, it’s beyond time to take action. Fortunately, filing for NJ bankruptcy isn’t your only option, even if your debt mountain feels insurmountable.

First and foremost, it’s crucial to be aware of exactly how much money you owe. It can be challenging to really SEE the true culmination of your debts, but trust us when we say that facing the reality of your situation is the only way to make a change. Ask yourself if you are more inclined to stay on top of a digital plan or if the act of physically writing things down works better for you. Then, sit down with a pad and pencil or your laptop. Compile a comprehensive list of your debts, being sure to include the following information:

  • Type of debt (Ex.: Mortgage, Student Loan, Credit Card, etc)
  • Name of creditor (Ex: Bank of America, Sallie Mae)
  • Total amount of each debt
  • Monthly minimum payment amount
  • Interest rates applicable to each debt
  • Due dates for each debt

IMPORTANT NOTE: Don’t disregard the list once you’ve made it. Refer back to it often, especially when paying the bills. As your amount of debt fluctuates, and hopefully decreases, make sure to update the list. Watching your total debt amount go down is immensely rewarding and can be the motivation you need to continue making progress.

Your next step is to determine how you will manage and pay off your existing debt. There are many different strategies, tactics and approaches that can help you chip away at your total debt amount before you even formulate a repayment plan. For example: if you currently pay monthly or quarterly utility bills, contact your provider(s) and negotiate a more manageable payment plan. If you show that you are being proactive, they will be more inclined to work with you.

Another way to make your debt more manageable right off the bat is via loan modification. If you can get the monthly payment reduced on one or more of your largest debts, your jumping off point will be much more advantageous. Additionally, you may want to explore settling a debt through a lump-sum payment.

As you create your debt resolution plan, you should employ (at the very minimum), the four following strategies:

1. Prioritize the debts that need to be paid off first.

Primarily, you want to consider the interest rate. Eliminating debts with a higher interest rate first will reduce your overall amount of debt faster. If the interest rates on all of your debts are all similar, you could choose to pay off the debt with the smallest balance first to give yourself a goal that is achievable.

2. Pay your bills on time each month.

By doing this, you’ll not only boost your credit score and keep your account in good standing, but also sidestep the possibility of having to make late payments, which will increase the amount of money you have to pay out.

3. Pay something, even if you can’t make the minimum payment.

Sometimes it’s a reality that you may not be able to pay the full bill on time or even the minimum payment. If this is a temporary situation, call your creditor and tell them how much you can pay that month. Paying even the smallest amount is putting forth a good faith effort that many creditors will look upon favorably. This doesn’t actually decrease your amount of debt, but it can sometimes buy you a month without late fees as long as you reach out to the creditor and explain your situation.

4. Create a monthly payment calendar.

This will give you a better idea of how and where to allot each paycheck. If your paychecks fall on the same day each month, for example the 1st and 15th, you can keep the same calendar from month to month. If payday varies for you, we suggest making a new calendar every month until your debt is under control – and even beyond.

If this all seems like more than you can manage, consider working with a professional. Many people balk at the idea of a debt-relief attorney because they don’t want to be “coerced” into filing for bankruptcy. However, in the same way that physicians don’t treat every patient with a one-size-fits-all remedy, attorneys don’t nurture financial health with a blanket answer.

Our goal at Veitengruber Law is not to see how many people we can get to file for NJ bankruptcy! Rather, we take the time to formulate an individualized plan for each and every client, particularly when they’re seeking advice for running a household or business. With this goal in mind, we will strive to restore your financial health to its optimum function. We have significant experience in dealing with creditors to negotiate debt resolutions other than bankruptcy. We will, however, give you our honest opinion if filing for bankruptcy truly is your best option. Call, email or FB message us today – let us know where you are in your debt struggle, and we’ll get started formulating a plan post-haste.

5 Mistakes to Avoid After NJ Bankruptcy

NJ bankruptcy

After your NJ bankruptcy, a common concern is how to re-establish your credit score. The real challenge is creating new financial habits so you don’t find yourself back in the same hole all over again. At Veitengruber Law, our holistic approach to financial health means our job doesn’t end after the bankruptcy is closed. We work with you to repair your credit and create healthier financial habits.

 

Top Mistakes to Avoid After a Bankruptcy Discharge:

 

1 – Ignoring your credit report

When rebuilding your credit subsequent to a bankruptcy discharge or reorganization, you will want to be very attentive to your credit report. Your creditors are supposed to report any discharged debts included in the bankruptcy to the credit bureaus. These reports should show a zero balance and include a note indicating the debt has been discharged. It is crucial to follow-up on this and ensure that all creditors are reporting to credit bureaus correctly. If discharged debt is being wrongly reported—as either a charge-off or an open account—late or missed payments can continue to show up on your credit. This can further damage your score and make it more difficult for you to get new credit.

2 – Applying for multiple new credit lines

It can be tempting after bankruptcy to rush out and apply for a gaggle of credit cards or loans in an attempt to quickly repair credit. However, it is important to give your credit score time to rebound before applying for new credit. The impact of a bankruptcy is strongest in the first year after filing, although it can stay on (and affect) your credit report for up to ten years. Instead of rushing into opening several credit lines at once, be patient and take the time to research your best options.

3 – Failing to read the fine print

When you do start applying for credit cards, it is important to remember that not all credit cards are created equally. Some credit cards will be more helpful to those rebuilding post-bankruptcy. A secured card, for instance, allows you to deposit cash as collateral up front to create a line of credit. That way, you are not able to charge more than your initial deposit. With any card you choose, it is important to read the fine print of your terms to make sure the card will work in your favor.

4 – Falling for credit repair scams

Many unethical “credit repair companies” make big promises about performing miracles to improve credit scores, but they rarely ever deliver the results promised. These companies rely on misinformation to scam those that don’t know much about how credit works. Some of their tactics may even be illegal. Keep in mind that if something seems too good to be true, it probably is.

5 – Making things too complicated

Ultimately, when it comes to rebuilding your credit after bankruptcy, you need to go back to the basics. What bad habits caused you to file for bankruptcy in the first place? An unflinching assessment of your spending habits will help you determine which factors led to the bankruptcy and determine where you need to make changes. Figure out what your credit-bingeing triggers are and work toward setting spending limits for yourself. Simple things like making on time payments, keeping debt to a minimum, and sticking to a healthy budget are excellent foundations of any financial strategy and will get you on the road to financial health quickly.

You’ve been through the hard-fought financial battle of bankruptcy and come out victorious on the other side. Now is the time to think positively about your financial future. Rebuilding your credit after bankruptcy takes time and patience, but you can use the knowledge and financial savvy you’ve learned along the way to move forward to a brighter future. Veitengruber Law is here to help. We are skilled in advising clients and creating easy-to-follow strategies to rebuild credit. Call for your free consultation today.

How to Raise Your Credit Score: Hire a Trusted NJ Attorney

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When hear the word ‘credit’, a number of images may pass through your mind. Maybe you think of a situation in which someone owes you money or perhaps you picture a bank. You may consider your education and the credit you received for each assignment or even a situation at work where you deserved credit for your hard work or a good deed. If you’re involved in the financial world, your mind might immediately jump to credit scores: good credit, bad credit, and everything in between.

No matter what you envision when the conversation turns to ‘credit,’ toss in a bit of everything mentioned above and you’re on your way to completing the puzzle of what’s known as a ‘credit score.’ A credit score is a three-digit number that is computed using an algorithm and is based on information gathered from your credit report. Its purpose is to predict risk. Ultimately, your credit score represents the likelihood that you will neglect your credit obligations in the next 24 months.

Though there are a multitude of credit-scoring models that are utilized, the most well-known is the FICO credit score. According to myFICO.com, 90 percent of all financial institutions throughout the United States use FICO credit scores when making a number of important decisions. The three-digit number ranges anywhere from 350 to 800, with the lower number representing a less-desirable credit score.

How do you avoid ending up with a low credit score? What factors play into the algorithm? There are five categories that influence a credit score. The percentages represent the weight of each factor in determining the score.

·        Payment history (35%): Paying your bills on time is crucial. By not paying your bills by the deadlines, you will cause your credit score to decrease. Also involved in this category are any delinquencies or public records.

·        Amounts owed (30%): The amount that you owe on each of your credit accounts heavily affects your credit score. Also, the amount of possible credit that you have on accounts is strongly considered.

·        Length of credit history (15%): The amount of time and number of accounts you have open will boost your credit score, as long as you’re paying the dues on time.

·        Types of credit used (10%): Having a variety of types of accounts will help you out. Two examples are revolving and installment.

·        New Credit (10%): How often you pursue opening new accounts and new credit, including inquiries (whether you’re approved or not), will have an impact on your score.

Now that you know what goes into a credit score, you realize how malleable it really is. If you don’t give the three-digit number a little bit of TLC, it can quickly bottom out on you. On the other hand, if you are careful with your finances, you shouldn’t have a real issue keeping your credit score in line.

We know that establishing or reestablishing good credit is key to a secure financial future and we want to help you move toward that goal. As you read before, many financial institutions use credit scores and reports to make decisions, manage risk, and increase profits. On the downside, they don’t have any interest in looking out for your personal credit score and overall financial health. That is where Veitengruber Law steps in. Our holistic approach to building credit is at the center of everything that we do. The guidance we provide doesn’t end with a negotiated debt solution or court case. Instead, our goal is to set you up to be a successful financial consumer with well-rounded money smarts.

When your credit score drops following a short sale, a bout with bankruptcy, settlement, or other issue(s), we will walk with you to educate and counsel you. A sturdy financial foundation will give you the power to develop and maintain financial health.

The only way that you will mature in your knowledge of money is to work with experienced professionals. Credit scores and financial health is nothing to mess around with. Your confidence will rest in how well the professional counsels you along this path. With years of experience working successfully within a multitude of situations, we know that we can help you no matter what kind of financial “mess” you may have landed in.

What is a Business Credit Score and How Important is it?

Whether you know it or not, if your business has a business credit card, you also have a credit report. This may be completely new to you, or maybe you’re just trying to find a bit more out about what exactly a business credit score entails. Either way, you’re in the right place, so keep reading!

What is a business credit score?

It’s the key to your business’s financial success. If you’re familiar with a personal credit score, such as a FICO credit score, it’s similar to this. In most cases, it’s a number between 1 and 100 that represents your business’s creditworthiness. Your score tells institutions whether or not they should lend your business money and how much they should be lending. They can also discern how likely you are to repay them in a timely fashion. A higher number on your credit score represents a strong history of taking out loans and repaying them on time.

Why do I need a business credit score?

Most likely, if you’ve just started a business, you’re using your personal credit to get the ball rolling. Using your personal credit indefinitely may not be the best decision for your business. Here are a few examples as to why establishing a business credit score is beneficial:

  • Easier to obtain financing: If you are able to establish a business credit score, it will easier to obtain a loan or line of credit in the future.
  • Potentially lower insurance policy rates: Insurance rates will rise as your business flourishes, but with a superb business credit score, these rates may be lower.
  • Separation of business and personal finances: By creating a credit profile for your business, you’ve added a degree of separation between personal and business finances. This makes it easier to track expenses for the purpose of taxes. Also, you won’t have to worry about personal finances, expenses, and debts intermingling with business finances.
  • Increased borrowing power: Larger amounts of financing may be easier to get if you have a decent business credit profile.

Establishing and growing business credit can reap remarkable benefits and financial advantages for a company. With a notable credit profile, businesses have a better chance at leasing equipment, securing lines of credit, obtaining a company vehicle, and getting a business credit card or loan without compromising personal credit.

Finally, it’s important that you know exactly what affects your credit score.

  • Payment history: Likely the most obvious factor, it’s crucial that you make payments on time and for the correct amounts. A string of late or missed payments will result in a lower credit score.
  • Length of credit history: A well-established line of credit is going to create the best credit score. Even if you have a history of a few missed or late payments, this is better than a short or nonexistent credit history.
  • Company size: Though this may vary, some lenders prefer not to lend to businesses of a certain size.
  • Credit utilization ratio: If you max out on all lines of credit every month, this will send a signal to lenders. Essentially, you want to be aware of how much you owe on current credit lines in relation to their limits.
  • Risk Factors: Some businesses possess risks simply based on their industry. For example, a business located in a town with a low population density may be considered high risk in comparison to a business in a highly populated location.
  • Public Records: Filing for bankruptcy or a history of civil judgments or tax liens against a business have proven detrimental. Since these are public, anyone can view this information.

Like many financial matters, credit scores are constantly changing, some of which is in your control and some is not. By focusing on what you can control and knowing what you can’t, you will be a more effective business owner. A commitment to striving for a great credit score will provide opportunities for improved financing, increased cash flow, and better business breaks.