When should I get a mortgage?

Question

My lease is up on May 1st. I only have a small downpayment and my husband and I both have poor credit scores (mid 500s). Together our income is over 55000, but since we are young, we haven't had our jobs very long. We have some old collections accounts (about 4 years old) but I have several positive lines now. We are currently working to settle our old debts but this could take a few months. Should we try and get pre-approved now, or should we stay in another apartment and wait for another year? I want a house!!

Answer 1

You will have to settle your debts before you can apply for a mortgage loan - they will not approve you with collections still open. You will have to settle with those and get a receipt from the company or companies that you are settling with. Also make sure that you continue to pay any credit cards now, you may have to provide proof that you paid credit cards the month your mortgage is approved - also you can get first time homebuyer assistance for a down payment when you do buy a home and also make sure you get a fixed rate interest on your mortgage, dont get a variable rate - it will raise up as time goes by.

Answer 2

the problem you're going to have is that with a low credit score you need a larger down payment. You need at least a 580 to get a 100% (does not include your closing costs, that's out of pocket or the seller will have to pay.) With a 580 100% you will be going through a sub prime lender that charges a much higher rate of doing business. You're looking at possibly 8%. Here's the good news. You can raise your credit score in a very short period of time by paying off a few recent debts then having a re score done. I had a client do this raised her score almost 50 points and only cost $150. Also because of the recent housing slump a lot of houses are lease option. You lease/rent for a year or two then have the option to buy. Most often a decent percentage of the "rent" goes toward the down payment. The most important thing you can do is research. Check out MSN's money and other sites to help you know what is out there for you.

Good luck

Answer 3

GET THE HOUSE: You need to start right away and get a payment agreement with all creditors. MAKE SURE THAT ALL OF THESE ACCOUNTS DO NOT EXCEED $1,000 per month.

Push for 2 months more on your rental contract.
Your credit will be in good enough shape if you pay all bills on time -Feb, Mar, Apr, May, June. In May, apply for a mortgage approval, if you took care of your credit it should be about 600. This is not great, but it is good for a first time home buyer.

MAKE CERTAIN YOU MAKE A "GOOD PROPERTY BUY". A "good property buy" is a purchase of real estate where there is more equity in the property than mortgage and fees. (Appraisal value $157,000 - sale price $115,000) the $42,000 worth of equity will permit you to get approval with a small down payment (or no down payment).

Often there are properties that can be gotten cheaply, and be fixed up over time. This is the best way to make a financial turn around. I bought a property for $23,000 lived in it for 2 years, spent $51,679 fixing it up. Sold it for $142,190 put the profit in my new home. When I bought the first property I could only afford $2,000 to do the deal (no down payment). My next house, I had almost $85,000 to work with, and took out a $100,000 mortgage.

DON'T WAIT, START NOW AND ALL WILL GO WELL.

Answer 4

If you really want to get into a house then you could attempt to become pre-approved to get into a house this May, you'll probably need a larger downpayment.

I would suggest waiting one more year, pay off all old debts and give yourself another year of job history. This will make all the difference in the world when it comes to actually being pre-approved for a mortgage. The biggest mistake most people make is getting into too much debt, too fast. Wait it out this one year and you'll feel the difference and be that much more satisfied when you get into your home.

Good luck!

Answer 5

You can try and most likely someone will approve you.

However, with scores under 600 you are going to be paying some high rates. If possible, wait until one of you can work your scores up over 620 or so. Otherwise you are going to end up paying more back in interest then you really want to.

Your income is good enough to get you a starter home or condo in most parts of the country, but perhaps renting in the smarter thing to do until your credit scores get up a little to get you prime loans.

Answer 6

If you want a house try to get pre-qualified. Be realistic, you are going to pay higher interest rate, but if you can get approved you will have equity. And if you can't get in to a house then work on your credit and try again as soon as your credit is fixed.

There are all sorts of programs with with little or no down payment, even with less than perfect credit. Be very cautious and ask for Good Faith Estimates. Ask how many point they charge. Ask about credit come back loans that reward you for making your payments on time, by reducing your rate.

Fix your credit and consider refinancing, so try to avoid prepayment penalties. To fix your credit I recommend that you go to www.myFico.com and buy the credit simulator and use it.

Answer 7

You are going to pay too much..ask 6 real estate agents around the area where you would like to live and tell them you are interested in a lease with an option to buy in two years. Get the price set now (pay for an appraisal) and pay the lease. Then make up your mind to buy it or not later. If the values go up and you like the area and the house is O.K.....you can take the plunge. Good luck

Answer 8

you will pay more interest on the house the more "subprime" your loan is. i think you should go for the house now. even if you pay off the old debts it won't totally clear the record because you didn't pay them ON TIME. THis is a common misconception is that you can erase your bad credit by paying off the old debts. You should still pay them but it won't go away totally. You must pay everything ON TIME to have a good credit score.

Answer 9

Obtain conseling from a real estate agent who works with people who have low credit scores. Now is the time to buy -- alot on the market.

Answer 10

you should definitely apply now. yes your interest rate will be higher but why spend the money on rent for another year. I know many people-including myself who had flaws on their credit reports but were able to obtain a mortgage. get your preapproval and see what happens.