Can a person buy a home with bad credit?

Question

I live in Oklahoma, I have bad credit, but great income. Due to my ex, i found out that my credit rating is in the mid 500's, which sux. Any Ideas? I am so tired of paying rent, i think at age 41 I should be owning a home!

Answer 1

Hi. The first step would be to see your own credit, and then you will be able to begin to correct/address the issues.

You are entitled to one free credit report per agency per year. Start at http://www.myfico.com/.

[By the way, there are four, not three credit agencies: Equifax, Experian, TransUnion, and a fourth one (the name of which escapes me, and it's hard to find information on it. I think it tracks medical-related items, but I just don't remember) There are also agencies that track things like being overdrawn at the bank, etc., which can also count against you when your credit is damaged.]

You may be able to immediately improve your rating by successfully disputing credit items in your report. If you and your (ex-)husband held joint credit, you may need to investigate whether you can sever some or all of the items. Depending on the amount of debt you owe and the terms of repayment your spouse may already have agreed to, you may be able to negotiate with the creditors to arrange reduction, dismissal, etc., or to get them to agree to a payment plan. Even if you have to pay off some of his debt (if you cannot excape it as part of your divorce arrangements), it may be a way out from under the bad debt. Just make sure you have established your own credit separately *now*.

Second: There are statutes of limitations to debts for each state, after which the items should no longer appear on your credit report. Check this at one of the sites that allows you to see the rules per state. One such site is http://www.creditrepairkitsoftware.com/limits.html (a site which also sells credit repair software -- I neither endorse it nor recommend against it).

Three: Pay down all your current credit balances and do not apply for any new credit until your score goes above 700. Creditors look at your credit history (repayment, debt/income ratio, etc.) and assume that if you ask for credit, you need credit, and therefore you are riskier than you might be. So every time (within a time range) you look for a mortgage, a lower-interest credit card, etc., you can take a credit hit.

Also, if you use more credit than you can pay off in a month, it hurts. Also, if you run your credit card above 30% of your total credit balance, it can hurt. So if you have a $600 card, make sure you *never* carry more than $200 in card debt, and try to get it paid down every month.

As you pay down your balances, you can sometimes negotiate with your creditor to lower your interest rates. They are more likely to negotiate if you have at least one solid year of paying more than the minimum and always on time.

Four: do not use a third-party agency unless you have investigated it. The FTC has guidelines here: http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm.

Fifth: you can get free guides about your credit score, how it's determined, what the rating factors mean, etc., from Freddie Mac and Fannie Mae, both of which are agencies that specialize in repackaging loans for less than prime borrowers.

Sixth: Save, save, save.

You will need to demonstrate that you have resources, amass a down payment, allow for closing costs, allow for moving expenses, etc. You may also want to think about a condo rather than a house (less upkeep for a single person, easier on the joints when you're not 20 anymore). If you go condo, you have the condo fees as well as the mortgage. If your credit is poor, you will also have mandatory insurance costs that are even steeper when you have a small down payment.

The banks will want to see that you could withstand a (temporary) loss of income and still meet your payments.

There are numerous books on income management, but the most useful thing I've seen recently was a guideline that suggested that you budget yourself to live on 60% of your income. See Richard Jenkins' article in MSN Money: http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/ASimplerWayToSaveThe60Solution.aspx. If you follow his guidelines, you will quickly reduce your debt and save up for that house.

Seventh: are you a first-time home buyer? If so, you may (eventually) qualify for special incentives. You will probably not qualify for income-based ones.

Eighth: are you patient? It can take a long time to make this all happen.

Many of us been in your boat, and we are finally getting to shore. I wish you the best of luck with it.

*** UPDATE 2006-10-27 ***

Information from Equifax:

"How Do I Get My Divorced Spouse's Information Off Of My Credit Reports Since The Judge In Our Divorce Gave Him/Her The Responsibility To Pay These Accounts?

You have indicated that certain accounts are involved in a divorce decree and are the responsibility of another party. Please be aware that a divorce decree does not supersede the original contract with the creditor and does not release you from legal responsibility on any accounts. You must contact each creditor individually and seek their legal binding release of your obligation. Only after that release can your credit history be updated accordingly.

If such accounts are still open and available for credit use, then it is prudent to urgently resolve those responsibilities. Once resolved, the creditors should properly update that on your Credit Report during their next reporting cycle to us. If the update has not yet occurred and you have documentation of the release from the creditor, you can provide that material to us via the mail (address listed on your credit report)."

Answer 2

No credit is different than bad credit. You do not explain why your credit is bad, but normally bad credit is due to paying bills late or not at all. You also have no savings for down payment and no cushion for an emergency fund. Sorry, you will have to do what all of us did while having little money and saving for a house: You live in a smaller place, you sacrifice and give up luxuries until you are in a position to buy a place. Save your money, improve your credit score by paying your bills on time and not carrying a balance on your credit cards. Once your credit is improved and you have enough saved up to buy a house, talk to a lender about how much you can be approved for. You need 10-20% of the purchase price for a down payment, plus another 2-3% for closing costs. You should have additional savings of 3 months living expenses as an emergency fund. The lender is going to look at: Credit score Credit history Down payment amount other assets Job stability other liabilities Good luck!

Answer 3

I had bad crediting and was able to get a home and now have great credit. You need to have 10% downpayment and then they will usually put it through any way. Get a mortagage broker and he can look at your credit and give you advice for your specfic situation so that you can get that house.

Oklahoma market is pretty reasonable so that should help

Also check with a realitor - I do not know if you have children or if this would be your first house but there are often programs/grants that are going on that can also help. Missouri has a deal 20% or 20 ,000 plus closing cost to help qualified individuals get a house.

Good Luck

Answer 4

Yes. For a one reason.

1) The one thing that is cannot be manufactured is more earth. If you use the banks money to buy property, they have in fact accomplished a few things. First they have drawn you into debt with interest and morgate payments that you may or may not be able to pay. If you CAN pay they raped you for the interest, usually 40% the original loan if paid over term because you have bad credit. If you CAN'T pay then you STILL owe the bank AND they have just aquired the property and move it on down the line to the next sucker that thinks he can beat the game....since property rarely depriciates it's a no-lose situation for the bank. Someone WILL loan you the money, but beware! You will be so happy to realize a dream that you might jump into something you can't handle. And they got you by the ya ya's. Work on your credit. And don't go looking for your dream house on the first shot. Start VERY modest and get in good with someone who does appraisals.

Answer 5

What I would do is really make an effort to improve your credit within the next 6-10 months then apply for the mortgage. Make your payments often and free up some of your credit.

Read this article before you make your purchase, "5 home buying mistakes."

http://www.foreclosure.com/articlecenter.html?action=displayArticle&articleId=1154&isLatest=false

Answer 6

Can a person buy a home with bad credit? Yeah, with good money.

You may be a renter for a while until you can get things straightened out, but at least the market has slowed down to give you a better chance.

Answer 7

There are some mortgage companies in Oklahoma that will let you buy a house with bad credit...I've seen commercials...you would probably have to have a huge down payment. Your best bet is to look in the yellow pages...ones that will give a mortgage to someone with bad credit is bound to announce it.

Answer 8

Call a Realtor and tell them you would like to get pre-approved for an FHA loan (first time homeowner) before you start to look at houses. They will hook you up with a mortgage company and they will run your numbers... FHA loans are the easiest to get, and you can qualify for them 2 full years out of Bankruptcy.... the worst they can tell you is that you need to build your credit. They can usually tell you what to do at that point. It never hurts to try and see what happens! Good luck

Answer 9

You need to check out this video on how to increase your credit score by using a 100% legal loophole. Here is the video URL: http://www.creditscoresecret.org

I was able to get to 595 from 489 in just one day and from 489 to 748 in just a few week; that's pretty fast in my book. Good luck!

Answer 10

I dont know about the USA, but in the UK you get specific mortgages for people with bad credit. You have to pay higher interest though.

Answer 11

there are plenty of mortgage brokers that I am sure you can contact to discuss your options, some may want a co-signer, others may not.....but if you have a good income, odds are you would qualify for a mortgage as long as the amount is manageable.

Good Luck :)