First Time Home Buyer?

Question

Hello,

how difficult a time am I going to have being able to buy a first home? My wife and I both have extremely poor credit. We have the $$ for downpayment (10% - 20%)... but from the looks of it banks aren't going to be inclined to look favorably on us.

Any thoughts?
Thanks,

I recently checked my credit scores and this is what came up...
Transunion: 503
Equifax: 459
Experian: 574

I have noticed numerous errors in all 3 reports but didn't think it was worth my time to fix... I'm beginning to think I was wrong

Answer 1

If you get knocked back from a few banks I would suggest that you probably are not ready to buy.

You might be best to wait a little longer.

If you really want to you will always find someone who will lend you the money but you have to ask yourself, am I going to be able to pay it back.

The fact you have bad credit should be an indiciation to yourself that you may have a problem with having credit. A loan for a home is a 20 to 30 year debt which if you rush (just borrowing of anyone that will give you the funds) may cost you a hell of a lot of money.

My tip, if the bank says no then you probably cannot afford it but that doesn't mean you will never afford it.

Answer 2

How bad is bad? What are the other factors?

In general, 10% down might go as low as 540 if you can prove you make enough money. 20% might go to 520. But if you're below 500, regulated lenders can't touch you and hard money is your only option. Hard money requires at least 25% equity, usually 35%, and the rates are awful.

Concentrate on getting your score up. It'll take a couple months or so, but if you have that kind of down payment, using some of it to raise your credit score may be the best use. I have an article that may be of interest here:

http://www.danmelson.com/posts/1147461204.shtml

It is not usually tough to raise a score into A paper ranges. Matter of fact, it's usually fairly easy, even if it does take a while. But I'd rather have A or near A paper loan three months from now than a rotten loan now.

Answer 3

My husband and I are buying our first home. We have really good credit but we are young- only 23. With not very long of a job history. Do you know your credit rating. We didn't think we had great credit until he pulled it up and we have great credit! You never know.

Our advice, just go to a bank. If you have 10-20 percent down great, but as a first time homebuyer you qualify as 0 down in most places. We are getting an 80/20 conventional loan, with 0 down. We just pay closing costs of about $2,000 and we get to keep all our saved up cash to decorate/fix up, etc. We got a decent interest rate also. If you are going to buy a pretty nice home, you could go with an FHA loan also where the interest rate is way lower than a conventional loan and you can only put 3% down. It takes a little longer to close than 30 days and the closing costs are about $4000 but your payments will be a little lower.

The bank wants to get your money off of the interest you will pay. They will tell you exactly what price of homes you can afford and they will give you a pre-approval letter to give your realtor if you find a home you like.

Good luck!

Answer 4

If your credit is really bad, your looking at private investors to fund your loan, or hard money lenders. Your looking at ugly percentage rates, and ugly rules & conditions.

You may want to try and fix some of your credit issues first, and hopefully not repeat the past.
Even one or two good current lines of credit is better then lots of $$ down.

The lender will look at the money down as nice, however, if you look like you will repeat the past with poor payments, or worse...no payments, they too will tell you "Sorry, no thanks"

Find out what your credit score is, and see if you cant improve upon it. Put the saved money into a CD to earn you some extra $$ for closing costs in the meantime. You may end up happy you did.

Best of Luck to you.

Answer 5

YOu can get financed. Banks won;t touch it but many mortgage companies would. YOu could also do a contract for deed with that much money down. You may want to take a good look at your credit report and start paying some bills down to get your score going up again. You don't have to pay anything off, just get your balances below 50%. Goo luck and let me know if you have more questions. I have fiananced people with similar info as yours.

Answer 6

I bought the book Home buying for dummies and it saved me thousands and some costly mistakes when I bought my first home. I checked amazon.com right before I posted this and found one used for $3.22 If you are really serious it is a great investment which at a minimum, you could read and sell again on eBay or Amazon again when you are done. Also, start watching the SUZE Orman show! She always has a segment that helps with credit and home buying. If you have TIVO, get a season pass. Hope this helps and remember one thing, banks will tell you what they are willing to lend you, that number is not always what you can afford.
Dewey

PS here is the link for Amazon:
http://www.amazon.com/gp/product/0764553313/002-2247050-6354432?n=283155

Answer 7

You can still be approved for a loan even your credit is bad. But the catch is higher interest rate will be given to you. And maybe a larger % of down payment will be rquired. The only thing you can do is buy a house that is not too expensive , that willl just be enough for you to afford the monthly mortgage. Remember every single cent will be calculated in your income and expense.

Answer 8

The banks will probably want a higher down payment.

You could go through a mortgage broker (like Ditech, etc.), but you'll have trouble getting a low interest loan.

Here's a site with advice on how to get a loan with bad credit:

http://www.consumer-action.org/english/articles/poor_credit_means_higher_interest_rates_how_to_avoid_bad_lo/

Answer 9

If you don't have any luck with the first lender, you can keep applying to other institutions. Keep working on improving your credit.
My daughter just bought her first house, and I learned a loan actually passes through several people who each decide separately (they must all agree).
Good luck. Hopefully in the future you will be asking about home repairs and the like.

Answer 10

You may want to look into the First Time Homebuyers program (if you qualify). In most cases with a credit score of 530, it will be difficult to get approved, but not impossible.

Here is a link to HUD regarding First Time Homebuyers FAQ. I hope it helps. http://www.hud.gov/buying/comq.cfm

Good luck!