Can we qualify for a home loan with these scores?

Question

I have a middle score of 637, and my boyfriend has a 577, both with credit cards with high balances so I am sure they will go up a little if we pay them off. He has some collections from a few years ago, one from an apt. I make around 26k a year and he makes about45k a year. He is in the business of building homes and he runs a store that sells the materials needed so he has good friends that would build us a home and give us lots of equity. We are looking to get around 150 to 170k to build. Do you think it is possible, or do you know of any loans that would work?

Yes he has collections owed, and we havent always made this much money. We moved here for his job, and he doesnt actually do the construction. He runs a store similar to home depot and has job security like no other (he will never lose his job.) The credit card debt will be paid off probably this month or next month, thats why I said our scores would probably go up. Thanks for all the replies

Answer 1

First go to a bank and see how much they will loan you on a home. They will give you all the info on the score that you will need to secure a loan. They usually require you pay off any debt that is still outstanding on your credit. You both have a good score but sometime even with a score like this they want more down to get the loan

Answer 2

Very important!!! Don't pay your collections.... until you run a credit analyzer report. Been in the business and I've seen it too often when people pay old collections and it actually hurts there scores. The most significant factor on your credit score, history wise, is the last 24 months. Old collections that have a last activity date older than 24 monthsare not hurting your score that much. When you pay one of these old accounts, it then reports as a paid collection(negative) but it updates the last active date to the month you paid it. That then makes it a recent paid collection, which will cause your score to go down. People misunderstand this factor. The credit limit to balance ratio is very important, pay down account but don't close them. Again, the analyzer will tell you what the optimal number is. Now on the loan, for a home that is already built, 580 is usually the number but try not to go subprime if possible. If you have 2 yrs of employment with w-2's yo ucan get a Fannie Mae Flex loan. It has a 4 level approval system and the rates are much better tha a subprime loan. The PMI may be high, but once you improve you scores a bit more you can then take out a 2nd mtg to get rid or just refi it, Fannie has no prepay penalties like the subprime loans. Also, they have a My Community / Neighborhood Advantage program based on the location your purchasing, you should definitely see if your area is in that program. On that program you may get a leve 2 approval but you'll get the top level rate. Also, the normaly PMI is significantly reduced.
If you're looking for a construction loan, it's more complicated. Some lenders base the amount they loan base on the project cost some base on the future value of the home once it's complete which may enable you to put down no money at all. You can finance the land purchase and the construction costs. Regardless, for the construction loan you'll need a higer credit score definitely over 600 and the closing costs are usually higer. I can point you in the right direction if you give me a little more info. But on the credit side, get someone to run the analyzer for you (you can get one for free) and tell you exactly what to do to improve your scores. Most don't know this but you can pay collections at closing instead of before applying if the analyzer shows that it will hurt your credit in the near term. Also, most subprime lenders don't care about collections older than 2 yrs, some 1 yr. On the application you can have the collections marked to be paid at closing.- [e-mail]

Answer 3

Yes, you can qualify with the score, but as for your boyfriend it might be harder. It can be done, but the rate might be high.

I live in Washington State and I am a Mortgage Broker. Most banks will not give a loan to someone when their credit score is under 580; I work with over 140 lenders.

When was the last time that you ran both your credit? Remember that lenders will use your credit score for 60-90 days, mostly 60 days.

Don't run your credit too much; every time you apply for credit or have someone do a credit check, it will bring your score down. When you find a good Broker, let them know when the credit was ran last.

Most lenders that I work with do not care about old collections, depending if it had to do with a foreclosure. There are lenders that will use the best credit score and the best income between the two of you. I have lenders that will also do construction loans up to 95%.

If you would like more info please email me at [e-mail], and I will email you back all the info that you need.

Answer 4

I must say few things first in this scenario. Not being married can cause some difficult problems,as I have seen in the past. Not a problem with me personally but being in this business as long as I have I have seen some interesting problems that developed over unmarried indivduals purchasing a house together.

The next thing, do you want a construction loan so your boyfried can build a house? This is what I surmised from your question.

If that is the case, you are in for a bit more difficult situation than just trying to get a loan. If you want to build a house most lenders will want to see that you own the land already. After you own the land then you apply for a loan to build your house.

Now in answer to your question, if you wanted to purchase a home not build a home, but purchase a home your boyfriend don't have the very best score in the world but yes he could purchase a home.

The reason I said your boyfriend is because he makes the most money and in that he would be the primary borrower. You can and should go on the mortgage as a co-borrower.

Now the $150,000 to $170,000 is that the value of the house once you have completed the building or is that what you want to pay to build your house.

There is a great difference.

#1 if you build a house worth $150,000 to $170,000 then it would cost approximaely $80,000 to $90,000 to build.

#2 If you build a house that cost $150,000 to $170,000 then after completion of building your house the value would be approximately $320,000.

Since your boyfriend is in he business of building houses, might I suggest that you and he find a fixer upper in your area that you can purchase below value, let him work and fix it up on the weekends or when he has free time. After about 2 years sell it for a profit and do the same thing over.

You will be establishing credit with the mortgages you will be paying and after about 2-3 houses you will have better credit and perhaps could qualify for a 100% loan.

If you want to do the loan bit and buy your home or build your home, find a mortgage "broker" that deals in construction loans, take 2 yrs of W2 and taxes for the both of you, a month of pay stubs, 6 months of bank statements and statements from any 401k and pofit sharing from your jobs. Once the mortgage broker has these documents he will get a cr edt report for the both of you. Once he has done that he can now tell you if you are qualified for a 100% loan, if not the amount you will have to bring to the table.

He should also be able to get you a permanent loan after the construction loan. Most lenders now do one loan for everything, however, you should make sure that you have a construction loan as well as a permanent loan.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 5

Hello -

I note that you said you are looking for a loan to build. This means you would then be looking for either a pre-construction loan and or lot loan.

The pre-construction loan would require that you break ground on your new home with the first 12 months.

It would also require that you have your building plans prepared. In reagrds to your yearly earnings, have they been consistent for the last 24 months?

The reason I ask, is that they will take what you made an average it over 24 months. If not, we can still get you a loan, but the rate would be higher.

Studies show that most Americans would rather see their dentist than have an appointment with a mortgage loan officer. The likely reason is that they are afraid of rejection - afraid of the big bad loan officer who will stamp a big red NO on their application. This is far from reality. Remember, Commissioned Mortgage Originators are in the business of saying YES. We've heard it all and seen it all and we are willing to help you, no matter what your situation is.

- Credit Problems are OK - You might be confused about how a lender determines if your credit is good enough to qualify for a mortgage loan. Let's clear up that confusion right now. Basically, if you've had credit problems in the past, the mortgage company will look at those problems and ask the following questions:

a.) How far in the past are your credit problems? (i.e.- if you had multiple delinquencies on your credit card this year, you might not be able to obtain a loan)
b.) If your credit problem is in the past, is it likely to recur again?
c.) Is whatever it is that caused your credit problem gone, or is it still present today?
d.) How good is the probability that you will pay your bills faithfully every month from now on?

- Judgments - If you have a judgment against you that has not been satisfied, you will not be able to obtain a mortgage loan. To obtain a mortgage loan, the mortgage company will require title insurance. Title insurance cannot be applied against your loan if you have an outstanding judgment.

- FICO Score - Although lenders look at much more than just your 3 digit FICO (credit) score, you should try to keep your credit as clean as possible, because the higher the score, the better!

- No Credit History - Even if you don't have any credit history whatsoever, you can qualify for a mortgage loan. As a matter of fact, it's not all that difficult. If you have a stable income, proof of employment, and a small down payment, you too can qualify for a mortgage loan!

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- If you don't qualify, we'll be honest and professional, giving you the same respect we would give an A+ credit borrower. We'll show you why you don't qualify and then give you a specific plan to follow so that we can provide you with home financing sooner, rather than later.

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Answer 6

Your score is good enough for 100% financing. The problem is that your boyfriend makes more money, and therefore will be primary on the loan, and he just misses (580 being a pretty universal minimum). If you have a down payment of 5 to 10 percent, or can get your seller to carry some back (very possible in this market) you should be able to get enough of a loan as long as you keep it to what you can provable afford. On the other hand, if you can improve his score a few points, you'll qualify for a better loan, and the further you improve both of your scores, the better the loan you qualify for. It is not difficult to improve credit scores into the 660 to 680 range.

Answer 7

You shouldn't have a problem. But definitely pay those credit cards down to below 50% of the balance limit. Then wait a month or so and contact a mortgage broker and get pre-approved.

If you are looking for a construction loan, it will be more difficult to get approved, especially with your boyfriend's score. You will also be expected to come up with at least a 10% down payment.

Purchase loans work differently. They are easier to qualify for and there are many lenders that will not require a down payment with your credit scores.

Best of luck!

Answer 8

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

Would you consider delaying your plan? Professional investors are careful in choosing each investment that would be near or immediately cash flow positive. With overpriced housing market, that is not possbile.

For example, it costs $500,000 to $550,000 to buy a two bedroom units in Sunnyvale California. Mortgage monthly payment with nothing down is $3500 to $4000 a month with 7% APR. The rent one can collect from such unit would be $2000 a month. Therefore, for each unit you buy, you would lose $1500 a month.

* We assume tax benefits would cancel out with tax and maintenance fee. Please consult your CPA.
**If you have large down payement, the rate may be lowered.

Another important factor to consider, home price may not appreciate as much anymore. In most area of the U.S., housing price stopped going up as inventory continues to build up. It is normal to see a correction as a boom that lasted for several years.

If you are investing new money in to real estate, this may not be a good time as the potential return on investment is small compare to the high risk of lower home price.

If you are doing a side way move, meaning you are selling one to buy another one, then it is acceptable.

Nothing is absolute, but housing market is very likely undergoing a correction and this is only the beginning. Some say this would be a soft landing (0 to 10%). Some say a big crashing is coming (10 to 20%).

http://money.cnn.com/2006/08/24/news/economy/newhomes/index.htm
http://money.cnn.com/2006/08/23/news/economy/homesales/index.htm

Answer 9

From experience:

I advise people to not buy a home with someone they are not married to. What happens when the relationship is over? No spousal rights here kiddo. Not good for either of you.

You think you have troubles now, wait until you do buy together and then split. You really should reconsider.

If he has bad debt from a few years back an has failed to reconcile it, he has set a pattern that will go for a long time. You really need to think long and hard.

Answer 10

No way JOSE sorry to say. You need private money. Put together a business plan and submit it to a hard money bank. If you can show them your plan and the equity they may loan you the money to build and then give you a high rate until you qualify for a better loan. PS its not just your credit but debt ratio and cash on hand.