My credit isnt great since my recent divorce. If i sell my home and pay off all of my debts will i still be able to buy another home with the money left from selling my home ? I will be able to put down a big down payment ...
2006-11-13 02:36:39 · 7 answers · asked by maggie 1 in Business & Finance ➔ Credit
A large down payment will help a great deal but don't expect the most competetive rate available if your credit has suffered. You may want to consider taking a 3 or 5 year ARM to get a lower rate but make certain that there is no pre payment penalty so that you can refi into a longer term once your credit has recovered.
2006-11-13 02:41:50 · answer #1 · answered by Anonymous · 1⤊ 0⤋
It depends on how bad your credit is and your employment situation. You may be able to get a hard money loan (the type of loan with 3 or more points), but that eats up your down payment. Why not keep the home you have, rent out a room to a local student for extra money, and use that money to pay down your debts. You can also get a hard money HELOC (home equity line of credit) which is typically easier to get (provided that you have some equity in your home) than a typical mortgage.
2006-11-13 10:42:03 · answer #2 · answered by Mr. PhD 6 · 0⤊ 0⤋
This really depends on how great your credit isn't. Banks and credit folks are really out ot make money. If you pay off your debts, you will be able to buy another house but your interest rate will be higher because of your not so great credit. You will not get the best interest rates going but you will get credit to buy a house if your debts are paid off. The mortgage companies look at what is called an income to debt ratio. So they will compare what your monthly bills are to what your monthly income is. This will give them the income to debt ratio. This will then allow them to give you an interest rate. Second, they will look at your spending patterns based on your old credit and will determine what kind of risk you are. Even though your old bills are paid, they will look at the pattern you had in spending. Then they will give you a mortgage based on these factors. Do alot of shopping around and do not accept the first interest rate you are given. There are plenty of brokers out there and they are competitive;. Watch out for inflated closing costs and argue about these the most. Have you talked to your current mortgage company about refinancing your house? They can be quite amenable about refinancing, charging less in closing costs, etc.
2006-11-13 10:50:59 · answer #3 · answered by juncogirl3 6 · 0⤊ 0⤋
The higher the down payment, the higher the likelihood of obtaining credit since there's more equity in the house if things go south, and your other debts are paid - this is the lenders perspective.
There is a formula lenders look at; you should spend no more than 36% of your net income on debts, which includes mortgage debt. If you've paid everything off, that's going to make you look GOOD to the lender.
You'll also be feeling better, huh?!
2006-11-13 10:43:00 · answer #4 · answered by WindWalker10 5 · 0⤊ 0⤋
The bigger the down payment, the lower the risk to the financial institution.
If you are working, and have a large down payment, most banks should be willing to lend you the money. they may even take the divorce into consideration.
2006-11-13 10:40:40 · answer #5 · answered by Chief BaggageSmasher 7 · 0⤊ 0⤋
The closer to 20% down, the better.
That said, debt to income is important and paying off debts might make it easier if you dont have a substantial income of your own.
2006-11-13 12:33:25 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Yes. There are many options for financing another home...especially with a down payment.
I write a blog on the subject of credit management, mortgages, real estate trends, etc. Check it out for more information that may be helpful.
2006-11-13 11:35:43 · answer #7 · answered by Anonymous · 0⤊ 1⤋