i need help on choosing a loan.. with bad credit?

Question

i have bad credit, im married he's got worse credit, we have a kid(thats where the bad credit came from)We have good jobs, good renting history with paying, finally back on track for auto loans (been awhile), and catching up on back bills but our rent is higher then a morgage, and we need a house. any places to turn ....please help. we need a house and are willing to pay high intrest. and when i say worse, his is in the 490, 500, and mine upper mid 540 560 please help

Answer 1

Ok - take a breath - Have you had anyone pull your credit - sounds like you have since you know your scores. There are a few programs out there that can help you - Do you have any collections, judgements on your credit report? The reason I am asking this, is the USDA Rural Guaranteed Housing Program is a awsome program, but accounts cannot have been placed in collection status within the last 12 months - and Judgements must be paid for at least 12 months. Exceptions to the above if the borrower has a 660 or greater credit score.
Which you dont have - so if you have any of these, try and pay them off - ok - That will bring up your score.

Here is a link to the site, that will let you know more about the program, and what it has to offer, but the bottome line is you can get a 100 percent loan, with no monthly mortgage insurance on top of the payment. There is a one time guarantee fee of 2 percent, that is added to the loan, so the loan amount is actually 102 percent, and the seller can help with 6 percent of your closing cost.

For maps or income limits for the Guaranteed Rural Housing Program visit : http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

BENEFITS OF THE USDA GUARANTEED RURAL HOUSING PROGRAM

Provides 100% loan-to-value financing for existing homes or new construction based on appraised value.
Available to low and moderate-income rural households.
No requirement to be a "first-time" home buyer.
Less up-front cash-to-close requirements for this program than for conventionally insured or FHA loans.
No monthly mortgage insurance required. One-time guarantee fee, payable to Rural Development (RD) at closing, which may be financed above the appraised value, as follows:
Purchases - 2.00% of loan amount
Refinances - .50% of loan amount
Fully amortized 30-year fixed-rate loans.
No penalty for pre-payment.
2/1 Temporary Buydown available. Qualification is at the start rate.
No maximum loan limit. Loan limits are dictated by the applicant's income with respect to program eligibility and loan repayment ability. Previous ties to FHA loan limits have been eliminated.
For depository institutions, USDA GRH loans provide opportunities to meet Community Reinvestment Act (CRA) goals

Now, another way to get a home. Find a seller willing to go with a land contract. Sign the land contract for 2 years, with your getting financing at the end of the 1st year. Pay by check for 12 months, to the seller. The land contract will have to be recorded at the local court house (same as a mortgage is). You would be responsible for the property taxes. At the end of the year, you will than do what is known as a refinance. The seller will than be paid off with the proceeds from the refinance. Lenders will WANT TO SEE the cancelled checks, as proof that you did pay, and that the payments were paid on time. That is called a "true land contract". And you now own a home after one year. That will give you time to build up your credit, and pay off debit (old ones on credit) and stay current on new ones.

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.
Different portions of your credit file are given different weights. They are:
35% - Previous credit performance (specific to your payment history)
30% - Current level of indebtedness (current balance compared to high credit)
15% - Time credit has been in use (opening date)
15% - Types of credit available (installment loans, revolving and debit accounts)
5% - Pursuit of new credit (number of inquiries)
The most important factor for a good credit score is paying your bills on time. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you may want to: keep balances low on credit cards and other "revolving credit;" apply for and open new credit accounts only as needed; and pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
Recent changes minimize the negative effects that rate shopping can have on a mortgage applicant. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for scoring purposes for the first 30 calendar days; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report.
Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that you did not score higher. The reason codes can help a lender describe the reasons for higher than expected rates or loan denial. Scores are not part of the credit profile and are not covered by the Fair Credit Reporting Act.
Your credit report must contain at least one account which has been open for six months or greater, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

Also, you stated that your credit was 540, 560 What is your middle credit score. The middle score is what lenders look at. If you get your middle credit up to 575, than you can get 100 percent financing, the rate is slighly higher (9 percent), but it does get you into a home. With a mid 550, you would be at 85-90 percent depending on various lenders. If you have a family member willing to help you with the additiona 10 percent, or find a seller willing to go with a seller 2nd for the 10 percent, than that is also workable.

I know I have given you alot to think over. One more thing - do not shop around alot ok - use a mortgage broker who will pull your credit once, and his lenders will use his credit report. If you go to 1 lender, and they pull your credit, and they can not do the loan, you go somewhere else, and they pull your credit. And so on.... A broker underwrites for many companies ( I underwrite for 150 companies).

Answer 2

Have you considered a lease option??? This is targeted toward people exactly in your situation (good job, good payment history, bad credit)You put a down payment on the home. You then pay rent monthly, plus a little extra toward the "mortgage." At the end of 2-3 years you are able to buy the home at the decided upon price. By then your credit should be better and you will have paid down the amount you will have to borrow. In the mean time you will be living in your home and working on your scores. Be careful though, because if you miss payments, you can end up in default (like a mortgage) and end up losing all that you have already put toward the home. Talk to the owner of the home you want to purchase and see if this is an option. Then make sure you talk to either a real estate lawyer or an agent, so that the lease option works in your favor.

Answer 3

With credit scores that low you're looking at 25-33% interest, if you can get a loan at all.

You'd be better served by paying on your bills regularly for a year or so. pay off some of your smaller debts, and then getting your free credit report and disputing the other bad marks.

Answer 4

Why do you need a home?

Take the next year and work HARD to get your credit in order. Don't set yourself up to fail with a higher interest rate and higher payment. Set your goal to get to a 620 credit score. That is the mark that will put you in a decent mortgage situation.

It is going to take a ton of work, but you will put yourself in a situation to succeed, instead of a situation to fail.

Just an FYI that there are loans out there for you, but you need to seriously think about this. WIth a home comes mortgage payments, broken water heaters, broken A/C, leaky faucets, etc.

Be careful.

Answer 5

that high interest is a bad move...continue working on your credit score and renting...once all your back bills are current it will take 6 months for your credit score to go up. then look for loans...you will get a much better interest rate and in the long run end up paying less for your home.

Answer 6

Funny how you blame you bad credit on the kid, must be evil, the rotten little thing messing up your credit while you were unaware.

Sounds like you are to immature to try to get more credit. The best idea would be to work on the bad credit you have now before trying to get more credit.

It's funny how bad credit is never the persons fault. Why not live on the money you make.

Answer 7

Lender will give you money for sure. Probably charge you a higher interests rate and extra insurance on the loan for not having downpayment.

Would you consider delaying your plan for 2 reasons? First, use this time to save a downpayment which will lower your borrowing cost. Second, housing market continues to slump, there is no need to jump into it now.

http://money.cnn.com/2006/09/07/news/economy/housing_forecast.reut/index.htm?postversion=2006090713
http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814

If you plan to continue with your purchase, try to stay away from
adjustable loans, because they will lure you in with initial low
payment. Usually people end up a house too big (mortgage is liability).

Try to avoid interests-only loan also, because that is like paying
rent, because paying interets won't add equity to your house and per current market condition, there won't be any appreciation to save the day later.

Finally, consult with a CPA or accountant, not the realtor or agents. CPA and accounts gets pay by consulting. Realtor and agents gets pay by commission, which means they WILL make effort to make sure you buy or sell.

Good luck! :)

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As housing market slump, it is easier to calculate "Rent vs. Buy" scenario. Because "appreciation" is no longer a factor.

Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

If interests portion of the mortgage payment is roughly equal to rent of equivalent property, then it is a decent buy.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

And again, if you like a particular property, then paying more may be reasonable. You are the only person who can decide how much more premium you are willing to pay.

Answer 8

I don't know of any lenders who will work with a score of less than 500 but if you're both over 500 then go to a good mortgage broker. They'll be able to help you.