Any possible way ... first-time homebuyers?

Question

Here's our situation. We have been renting the same place for 10+ years and want to buy a small home that's for sale. My fiance gets paid cash (and gets paid enough to cover the estimated mortgage). We don't have great credit (minor flaws from probably 5+ years ago).

Obviously, I'm prepared to hear that I'm crazy for bothering. What steps should I take to improve our chances of obtaining a home? Are there any programs or loans that might give us a shot? (We're in CT, if that helps.) We have little family and we really don't even know who to talk to, so any help/advice is greatly appreciated.

Answer 1

A lot of banks offer specials for first-time buyers. Stick with a bank that is part of a chain. Call and talk to a loan officer. They can tell you what you will need to do if you don't qualify. Make sure you check your credit report and print it out before you go. You can get a copy free once a year. Google "free credit report" and you should get to the site. Your state may also have loans for people in your situation, but you will have to ask the loan officer. If you don't like the first one that you talk to, go to another one. Ask co-workers which banks they recommend or use your own bank.

Answer 2

First, if you mean that your fiance gets paid cash so there is no proof of employment history or income that can be dealt with by the loan officer, you need to tell them you are going to use a "stated income" instead of a "proven income." I will not lie, this does require a little better credit score but they use this all the time especially for people that have tip job since that is not reported till the end of the year.

For the credit problems there are a few solutions to get your score up, first if you have any cards make sure they are paid down. If you don't have cards or can't qualify get even a secure credit card. This is where you put up the money, say 500.00 and then whoever, say Wells Fargo puts that on a card - Visa. This is reported and helps your score. Remember the agencies report one a month. Furthermore make sure you go on-line to Experian, Equafax or Trans Union and get a copy of your credit report. Even if you think there is nothing wrong this will help A LOT if there is anything that is being reported wrong. Also remember to get a FULL credit report meaning all three agencies. Your score is determined by taking all three scores the mortgage company will drop the top score so remember if you do have cars, credit cards etc...a lot of the time one agancy will take on a major portion of your credit - say trans union so their score is gong to be a LOT different than the other two reporting agencies.

Look into the 80/20 loans - this will give you a second on the house right away (80% on one loan and 20% on the other for the total of the home), but they are made and created for your situation. Less than perfect credit and if you do not have 20% down on the home this may avoid having a PMI (private mortgage insurance). if you have Fieldstone mortgage in your area they are GREAT! (I do not work for them, but I have delt with them for a home and were excellent). They are nation wide you might want to visit their site and see if they are available.

Answer 3

Some of the above answerers are on the right track. There are lenders that will look at your wife's bank deposits for the year and call that your income. That should solve your income dilemma. I generally don't recommend interest-only loans for first-time buyers, but since you know your wife is making enough to pay for the full payment, I'd probably make an exception.

Credit is the interesting part of this question. You say you don't have great credit, but you only have minor flaws from 5+ years ago. If you are paying on a couple of credit accounts right now and your only problem is from 5 years ago... you probably don't have a problem.

Your credit score is much like the American public: we have short memories. Most bad credit items stop effecting your score 2 years after the last date they reported to the credit bureaus.

You don't know until you check, but your score may not be that bad after all. You may qualify for 100% financing right now. You never know until you speak to a mortgage broker.

I would suggest you speak to a mortgage broker. They have access to conventional AND non-conventional programs. Banks only have the conventional programs that have less flexibilty and require higher credit scores. Mortgage brokers have more tools to give you a better chance for approval.

The first step you should take is to educate yourself on the mortgage decision process. Start by reading the articles in this blog: http://explaintome.blogspot.com
It will give you an idea of what mortgage brokers do and how lenders make their decision.

Someone also mentioned rent-to-own situations. This is a great option if you can rent the home you definately plan on buying. It offers you a solution even if you don't get approved by a mortgage broker. After you've lived in a house for 1 year and paid rent by check, you can use the equity in the home to your advantage to get approved more easily. This should be your "Plan B".

Best of luck to you and your family. Homeownership is possible now more than ever with all the loan programs available to you.

Answer 4

You can show your cash income with bank statements. IF this is not an option, you are going to have to go with a stated income loan. Not the end of the world.

From what you're saying, I'm willing to bet your credit is better than you think. Most people who think they have not so good credit because of issues 5+ years ago, really don't have bad credit at all.

You need to talk with a qualified loan officer/ financial advisor in order to get a better perspective of whether or not you should be looking to buy a house in your area. Chances are, you are a good candidate since you have such a long time in the same place. I have the feeling you are a stable person and haven't missed a rent payment in years.

I think you're a great candidate, but there is a lot more to know before I can say for sure.

Answer 5

You don't say whether or not you have a down payment. If you have as much as 20% down, you are probably in pretty good shape. Credit blemishes from five years ago aren't going to affect your score that much if you've kept a clean history since then. You can go with a stated income loan with most lenders so you don't have to document your fiance's income.

If you have less to put down or your credit score is lower than I think it is, it'll be a little bit trickier. But even subprime lenders have stated income programs; you'll just pay a higher rate than you otherwise would. The good news there is that a paid-as-agreed mortgage does wonders for your credit score and you'd likely be able to refinance to a lower rate in a year or so.

The first thing to do is to pull your credit. There are tons on online services that you can use. The "free" services usually require that you sign up for some kind of credit monitoring service that is NOT free. But, for a nominal fee, you can pull a report with all three credit scores. Once you know your score, you'll have a better idea of what your chances are (and seeing your report will show you what little things you can do to increase your score.)

Talk to a loan officer at any major bank as a place to start. If your situation doesn't fit their niche, they'll let you know and then you can start talking to subprime lenders. Don't undersell yourself, though; there are loads of programs and ways to structure loans that might work for you.

Answer 6

I am not an expert, but I know my son was in the same situation last year. He had largely cash income when he bought his house with his fiance, and he had little trouble getting the mortgage. That was because he had good credit. In your situation, that might be your saving grace - repair that bad credit history.

After that, you could go to get prequalified at a lender that does stated income loans (or a credit union which typically has more flexible income requirements than a commercial bank).

In my area, they have "First time home buyers" seminars, where they will give you your credit score, some financial help with closing, and different mortgagors to choose from.

You can check on the Internet, using "Stated income mortgage" and include your state in the search to see what comes up in CT.

Answer 7

Hello,

My first house I purchase was with 100% no down and I had a 530 credit score! How I did it was persistance and patience working with my lenders. Do not expect to get the best deal but understand that you will most likly re-finance within three years so my suggestion is get a loan with a payment that is workable for you and forget about all the fees and intrest rate because you are looking into this for the long run it is you personal investment for you and your family.

Heres what I did and it works...

1. Pull your credit from all three companies so you know what you are working with.
2. Contact Country WIde mortgage or New Centery and they will refer you to a new contact for your loan docs.
3. Never, ever take first offer!
4. Always negotiat, rememeber these people make money off your loan so they work for you.
5. Ask for a no-doc loan program based off stated income.
6. If you need 100% financing please start with a first mortgage at 80% LTV (Loan to Value) and a second loan for your 20%. Note: the second loan will look as it is your down payment.
7. Once approved for your two loans tell your contact that you would like this to be all under one loan, this is a power tip because most dont know this... when you get a split loan it is usally within the same company who is financing this for you so you have the ability once approved to request a merge of both loans into one primary loan.
8. If you can try negotiating your pre-payment penitally, you need to be carefull on that because it can really screw you!
9. get your keys and move in!

Best of luck,

Brandy

Answer 8

is your rent payment history perfect, no lates or non payments? Can your fiancee provide documentation for his cash payments? Do you know your credit score? How much is the house. All these factor into whether or not you can get the house. If your score is low 500-550 there is hope for you and they're called sub-prime lenders. your rate will not be good but you'll at least get the house and can work from there. if your score is below 500 then you're crazy. your credit score is your key here, either yours or your fiancee. salary isn't really that important. I've had people approved for 150k loans and only made 30k a year. There are I/O loans available to you but you need a good score to get them. I/O loans (interest only) yield small monthly payments for 1,3,5 years in which you only pay the interest on your loan amount but not the principle. after your I/O period expires, your payments will increase significantly so be prepared. any questions, email me.

Answer 9

Talk to the loan officer or mortgage officer at the bank where you have your checking and savings account. If you have no savings account, it probably is hopeless. The big problem will be documenting the cash income. Does he/she pay taxes on it? If not, the only record of his/her income is the bank deposits. And admitting that he/she gets what is an illegal (unreported to IRS is illegal, no matter the source) income may ruin it all for you. But there's no harm in asking, especially if you go alone and do not mention your fiance's name, but only his/her circumstances.

You'd be surprised, however, what they may be willing to do if he/she does pay taxes on the income. In that case, even if your total income is relatively modest, the mortgage is a sufficiently good investment for the bank that if the house is in good shape, and worth somewhat more than the asking price, you may be able to get a mortgage with a reasonable down payment (at least 10%).

Answer 10

We talked to a Remax agent that dealt in rent to own programs, turns out he knew what bank managers to talk to, and what lawyers to deal with, and even with our bad credit we looked like gold and actually got a real mortgage and bought our first house, we didn't believe it was possible, but 5 weeks later we were in our first home, 3 bedroom detached with a 1 car garage, two car driveway huge backyard in a 15 year old neighbourhood..p.s no monet down, and 5% cash back on the mortgage that went toward the down payment on the house, just by agreeing we payed off $5467.56 without a cent out of our pockets