Is it better to have a nice down payment or a better credit score when purchasing a home?

Question

I want to purchase a home for 90K-100K and my score is in the high 500s

Answer 1

Nothing speaks louder than money!

Answer 2

You can get a 100 percent loan with a middle credit score of 580. Lenders take in other things, like job time, your debit to income ratio.

You can get your home with a rate in the 8's or lower if you go FHA (the loan amt is at 97 percent FHA), and only bring in 3 percent, and the rates are 6.50 - 7 percent. (That is a fixed rate too).

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

When you Decide to buy, decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now - (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 - This is just a estimate - ok -

Go to these websites

http://www.nehemiahcorp.org/

http://www.fanniemaefoundation.org/...

http://www.fha-home-loans.com/

http://www.freddiemac.com/

home values Just add 10-15 percent to the values on this site.:
http://realestate.yahoo.com/Homevalues

If you go with a FHA loan, FHA has MI included. (With a 580 + you will be going sub-prime the rates are higher by about a 1 percent, but you have no MI. (MI is mortgage insurance in case you default on the loan, it is a way for lenders to have added insurance. It is not the same as Home Owners insurance, ok)

Conforming A+ borrower's loans have MI included, but the rates are better starting in the mid to high 6's (with rates going up.) The more money you borrow - the higher the rate normally. There are a lot of factors involved.

With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true....

Answer 3

Well, I have been a licesed LO for about 3yrs, and not only from experience but also from an investment sense you will always need the credit score to get in the front door. You can put down a nice down payment, but if you don't spend the time building your credit, that could mean the difference between getting a home or gettting denied. The lower your score is, the worse off you will be in reference to intrest rates. And once you get your home and start to make those payments you will realize that had you had the score, you could be better equipped to compete in the world of rates and mortgages. I hope I've answered your question fully, Definetely want to make sure you have both and this was a very good question. Take the time and speak with an educated broker, like myself, (LOL!) and get an advantage on your best financial situation. [e-mail] or my company email at [e-mail] or check the company out on the web @ agfinancialinc.com
MB# 8019095000

Answer 4

Rose, I'm a finance manager and I talk to lenders all day long. Sweetie if your score is in the high 500' s and your trying to bye a home 90-100K then a down payment of atleast 20% will be the best for you. Your credit score is what we call a tear 3 so its not good and its not bad. But the down payment is going to do 2 things for you. One its going to lower your monthly payment and two its going to lower your over all financing price. Plus with a lower credit score it is going to show the lender that your just not going to put that much money down and then not make the payments. So it tells them that you are comitted to the loan. So Rose I hope I helped you out sweetie.

Answer 5

Generally, you don't get to choose.

If you have managed your money well, you probably have a good credit score AND a nice down payment.

If you have not managed your money well, you probably have a poor credit score and no hope for a nice down payment.

If you must choose one or the other, the good credit score will benefit you the most. This is because you will be able to get all loans at a lower interest rate --- not just your mortgage. This gives you a savings of thousands of dollars for as long as you keep your credit score good.

Answer 6

A better Credit Score.

Answer 7

If you have a lousy credit score and nice down payment you will might still pay a higher interest rate, but you will have equity. If you have a good credit score and no or little down payment, you are more likely to get more credit in the form of a mortgage.

Answer 8

Surprising as it may seem a better credit score with no money in hand will often times put you in a better position with a lender however if you are speaking to a purchase and sale agreement, a large down payment and an approval letter from your lender will most likely put you in a better position with the seller.

Answer 9

A down payment May be important but it is harder for some to save and when you are saving you are paying rent.
A good way to beat this problem is to forget about the down payment and get an OPEN mortgage. This allows you to pay your mortgage and still put EXTRA $$$ onto your principal afterwards. Putting EXTRA towards your principal works out interest free and is just like addind in a down payment as you go without having to keep paying rent while saving.
This way instead of paying someone elses mortgage while trying to save a down payment you can chip away at your own mortgage, thus winning instead of coming out with just the money which YOU saved. This only works if you actually make EXTRA payments though.
Its a great way to go if you can do it! DO NOT TRUST ANYONE IN THE REAL ESTATE BUSINESS TO HELP YOU MAKE IMPORTANT CHOICES, THEY JUST WANT THEIR 3%.

Answer 10

If the credit score doesn't influence the rate that you are offered then go with the larger downpayment. If you have to pay a higher rate because of a lower credit score then you have to figure how much that rate would affect the amount you pay over time.

Answer 11

If you have a big enough down payment (30-40%), nobody will check your credit score. If you have a good enough credit score, lenders won't require a big down payment. If you aren't perfect in either, then I guess you need both.