how can you buy a house with bad credit?

Question

my husband and i have bad credit, we are in credit couseling and have been for over a year, we are coming into some money and want to buy the house were in, we went to put some of that money down on our debts and the rest towards a house. our mortgage broker said we cant get a loan. we make good money and our debt is student loans and we also have a co signer that is willing to put property down on a loan for us. why is it so hard to buy a house. we pay more in rent than we would in a house of our own. and have never missed a payment or been late doing that. im really mad that this is so hard for us we just want a place to settle down with our kids.

Answer 1

There are many factors that the broker said you are not qualify. Ask him/her the reason? Is it

Not enough downpayment?
Debt has not been resolved?
Bankrupcy(if applicable) has not been discharged?

Ask the reason, and shop around. According to your question, you have only student loan? why the broker said no, I am wonder.

Answer 2

there are too many factors to be able to answer your question completely. almost all, if not all, mortgage lenders consider credit counseling the same as bankruptcy. unfortunately, the CC companies do not tell you that before you sign with them.

therefore, and also depending on your credit score, you may need to wait until you come out of the credit counseling to get a loan.

you did not state your credit score, which you have a legal right to know. You didn't state the amount of the down payment, sales price, and whether or not you have had a bankruptcy in the past.

if you take anything away from this answer, take this: go to more than one mortgage broker. it sounds funny but being a mortgage broker is an art, not a science. some are much, much better than others. Me? I work with buyers with good credit mostly. therefore, i will refer people in your situation to somebody i know that can take care of you.

never, ever settle on just one opinion. get 2, maybe even 3 opinions. look into FHA loans. there are loans that don't rely on credit score alone...fha is one of them.

i really feel for you. i feel great when i get people into a home but i feel bad when good people with bad circumstances can't buy a home and realize that dream. keep trying.

don't give up. it may be a bit of a cliche', but say a prayer. all you may need is an answer to a prayer.

Answer 3

Your question is a common one and the answers provided by the loans officers and financial experts so far, all contain very valuable information, from which most people can take lessons to protect your credit rating with your life for your future.

There are a few things you can try as far as buying a house and or home. Assuming that your first home is likely not going to be your last home, and therefore the home you first purchase becomes both part of what I refer to as stepping stones towards your eventual dream home.

This then also implies that the property/home initially becomes more of an investment rather than the perfect home. The reasons I explain this, is to get you in the frame of mind that we have to look at the real estate solution for you in a more creative manner, and not as the home that you will grow old in (at least not as the only way).

With this in mind we can now start looking at the real estate inventory in your local market a little more creatively, and you will need to sit down with a great realtor in your area and explain where you are what your plans are, and see if he/she will assist you with your plans.

Ok you ask, what are my plans?, good question, the answer in one line; You will be looking for homes with the right things wrong, and where a seller is willing to work with you with some form of Vendor/seller financing and or rent to own situation.

Now that I have likely confused you, what do I mean with "the right things wrong", well those are the things in and or around a house that you can fix, improve and or change, to add substantial value to the house, by using your own and or traded energy, time and creativity. Not knowing you, I can't determine what those things can be.

But let me give you an example, lets say that you find a Condominium, that is worn out, tired, and the previous tenant/owner smoked in the place 24/7. Ok You go in buy it right, and spend 1 to 2 months cleaning, painting, updating and changing the right things to it so that it becomes part of the current century, as far as the interior design. The whole objective will be for you to get a 3 dollar return for every dollar you spend on improvements.

If at the same time you can buy this suite, with a bit of seller assistance, by way of a vendor take back mortgage, or better yet, a rent to own agreement (this in a simple way means, you rent the property, with part of the rent going towards a downpayment, at a predetermined sale date and price).

Or even more creatively, for the first time you may be able to find owners of tired property, determine a current value of the property, you offer to do the improvements, while you live in the property for free, then when the propertysells split the profits with the owner.

Many of these Ideas come from various books, tapes and workshops I have attended over the years, but start at your local library, a good book to read is " the millionaire real estate investor"

By the way be sure to be honest about your situation with your team of experts you will be working with, this will include your mortgage broker, your realtor, your accountant, trades, you will be working with etc etc.

I hope I have given you a bit of a different perspective and solution to your dilema, good luck, have an open mind and be creative.

Answer 4

depends on a lot of things really but your main focus is your credit score. if you know your MIDDLE score, NOT your highest score, then that will give you an idea of what to expect. no one goes off your highest credit score. about 99% of the time it's your middle that is your "credit score."

Most lenders look down upon credit counseling as this hurts your score quite a bit. if you are in one, most places will require that you be done with the credit counseling AND have your renewed credit up and running. some lenders won't care however most do.

If you're in the 500-580 mid score range on your credit, you will need at least a 20% down payment on your house. usually around 620 and above you can qualify for 100% loans but I assume you're not in that range just yet. also helps if you have a certain house in mind too. can't simply get a loan THEN start looking for a house. gotta have everything coincide with each other to make things go a little more smoothly.

Your income helps quite a bit but your co-signer won't really matter unless they are the ones who are getting the loan for you. this isn't like renting an apratment or anything. what you should do first is get a copy of your credit report and look over everything to make sure its correct. if not then adjustments need to be made and your score might actually increase abit. and by requesting your own credit report, you can bypass all these lenders and brokers looking into you report and dragging the score down further. you have to know what your middle score is then you can get an idea of how far out you are in terms of getting a house and where you stand on your credit itself.

Answer 5

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

Would you consider delaying your plan? As housing market continues to slump, it might save you 10% simply by waiting for a few months. Another way to look at it, you can increase profit by 10% when you are ready to sell it.

http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814
http://money.cnn.com/2006/09/05/real_estate/Ofheo_home_prices/index.htm?postversion=2006090514

As housing market continues to slump, if you don't plan to delay your plan, please interview several and pick a good realtor or agent.

Bad ones will talk you into buying the largest property at your credit limit. Good ones will find you a good deal (Sellers are offering discount and incentives now).

Try to stay away from Adjustable Mortgage, because 30 year fix mortgage rate is very low right now. There is no reason to use Adjustable loans except fatter commission for loan agents.

Interests only loans are not good iether. 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 you want to use interests only loans, might as well rent, especially during market downturn, because housing price won't appreciate.

Finally, for tax benefits, talk to your CPA or tax accountant. Do not consult finance with realtors or agents. They get commissions when you sign the check!

Good luck!

Good article when you want to put in bid, negotiation.
http://biz.yahoo.com/brn/060909/19463.html

Different perspective:

It is a myth that renting is always worst off than buying.

Rent vs. Buy as Housing Market Continues to Slump

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 6

I'm assuming your credit score is below 620 which would mean you could only do business with "sub-prime lenders". Sub-prime lenders work exclusively with borrowers with poor credit, and because the risk is greater, so are the interest rates.

You can call some of these lenders and see if they'll be able to qualify you, but I would recommend you wait and build your credit back up to "A-paper" levels. If you wait and improve your credit you'll be able to qualify for more programs with lower interest rates and save yourself a lot of money. You'll also be less likely to default on your mortgage if you have lower monthly payments.

Answer 7

Sadly it takes a long time to clean up your credit history. It sounds like you are on the right track. You had to have been late with some payments to have bad credit now. Save your money, and every year, check your score and see if it has gone up. Good luck!

Answer 8

There are mortgage lenders who will extend 'B' paper loans - for those who are a higher risk and will pay higher interest rate. Try Ocwen. It will be harder and you will pay a higher interest rate but someone out there will be willing to lend you money. If not, wait a few months, there will be less loan applications and the lenders will be desperate for customers.

Good luck and be patient.

Answer 9

Listen to "clueless".

Talk to as many agents as possible, and know your downpayment amount.

Strive for a solution that is: You give the bank X - amount as a downpayment and they will guarentee you X - amount for a home mortgage (based on how much they feel is a comfortable monthly payment for all)...follow that?

hope this helps

Answer 10

well you gotta have a new one first .... i think it is just better than you wait to clean all the mast up with first one ....