What are the chances that we will be approved for a mortgage???

Question

Here's the situation:

My husband and I both have poor credit ratings due to one point in time when we had some financial problems beyond our control. We had several missed payments on several accounts (some as late as 90 days, but none were sent to collections).

Over the past 3 years or so, we have making on-time payments on all our bills, but usually just the minimum... so our cards are pretty much maxed out.

My husband has recently finished his training, however, and will be making six figures once he starts his new job next month.

We should be able to pay everything down within two months.

We would like to buy a house asap, but have no money to make a downpayment at this time. Combined with the spotty credit history... what are the chances that we can get a mortgage? How about a mortgage with no downpayment? Any suggestions???

Thanks in advance!

Addendum: when i say that our cards are "maxed out", that doesn't mean the debt is very impressive since we don't have high credit limits. All in all, we have about 4K in credit card debt, if that makes any difference. :)

Answer 1

You can get a mortgage, it's just more expensive.

I would strongly recommend that you pay off all the old debt with the new money coming in. After you pay it off, save the money.

The banks are going to do some math about your total payments. The less going to credit cards, the more you can afford toward a house. Thus, they will approve you.

By making up all the past due debt and clearing things up, you will improve your FICO score, which will allow you to borrow at the best rate possible. A quarter or eighth of a percentage point may not seem like very much, but it is tremendous over a 30-year mortgage.

You need to do a lot of reading.. buying a house is generally the largest purchase most people ever make.

If you can manage to save some money, you can reduce or eliminate Mortgage Insurance, which covers the lender in case you go broke for whatever reason. This is even more you pay.

Good luck!

Answer 2

You really need to slow down. Get everything paid down. Save up for 3-6 months of cash reserves, so you can avoid problems if something goes bad again. Then save up for a downpayment. Then buy.

This might take a year or two. If so, good. It's just that much longer for your credit scores to improve.

You're on the brink of being financially solvent again, and you seem desperate to throw yourself right back hanging on the edge again. It's not a good idea.

With your current credit situation, you will pay higher rates, if you can even get a loan with zero down payment. The more you put down, the better your rate will be. Sometimes by hundreds of dollars per month. Why waste that on high interest?

A good loan officer would take some time and help you map out how to get your credit scores up and get you into a good rate loan in 6-12 months time. Renting can be quite cheap compared to owning a home, there's nothing wrong with that. Use that to save more money.

Answer 3

For a credit score in the range of 585-599, you may have to make a down payment of nearly 5% to be approved for a home mortgage loan. Even in this case, your approval will come from a subprime mortgage lender. You have to approach a lender who deals exclusively in loans for people with not so perfect credit or in situations that cause difficulties in getting a mortgage.

If your credit score lies between 600 – 620, you might be easily approved for 100% financing. Even in this case, you have to approach a subprime lender.

For a credit score of at least 620, you can easily avail of 100% financing, along with a reduced rate of only 1 - 2 percentage points more than the prime rate.

Answer 4

I recommend waiting and saving for a downpayment. However, if you have scores of 580, check out the free evaluation form at

www.totaldebtsolutionsllc.com

They have a network of loan officers and should be able to get you financed. I guess you could always refinance into a better rate in 6 months after your score improves due to making ontime house payments. Good luck.

Answer 5

As long as your late payments DO NOT, I REPEAT DO NOT include a late payment on a MORTGAGE, you're more than likely going to pay a higher rate but approval maybe not out of the question. Lenders look at credit history as a laundry list....upaid or late strudent loans being the lowest, medical bills unpaid or late...credit cards are a can go one way or the other...then comes personal loans (car, boat, etc. payments), business loans, bankruptcy, etc...al they way up to late mortgage payments (those are the killers).

This of course is only what I've experienced and my OPINION; I'm not a licensed broker, lender, etc.

As for making 6 figures out of training, hook me up with that!