I want to buy a home in about 6 months and have bad credit, where do I start?

Question

My girlfriend and I have very low credit due to an issue that is being cleared up now. I should have better credit and cleared up debt in 6 months if things go well, but not great (not enough time). I am in an apartment and am never late with payments. What are my steps to go about getting in a $125-175,000 home. I was told to go find a mortgage company now, and they will help me plan what steps to take and how to clean things up? Is this true? I do not want to rent again but I am afraid that my credit will not be improved enough or my debts paid down enough to get me into a home. I would like to get an 80/20 loan, because I will not have built up enough assets to give a downpayment for my money now will go to cleaning up my credit. Any insight will be helpful. Thanks!

Answer 1

1) Close all credit accounts even those with 0 balances. THey all count against you.
You can keep one to use, but make sure it is paid off every month.
If you really want a house, make sure you do not have a car payment. Downgrade if needed.
Clear up anything that is outstanding on your credit report.

Spend as little as possible_ remember the things you want to buy now, for christmas, etc will all decrease your buying power for a house. If you focus everything one saving money and paying down any and all debt, you can do it quickly.
That means: No starbucks, no movies at the theatre, no drinks at restaurants; use coupons, return anything that still has the tags on it, sell your extra stuff on ebay or craigslist.org, eat at home as much as possible.
Take a look at your last 6 months worth of expenses: How much did you spend on stuff that you don't have anything to show for it now: Entertainment, outside food and drink, misc crap that you can't sell for what you paid for it.
Your girlfriend and you have to be on the same page: no manicures, no new shoes .etc

I have found so many things to do for free: Hiking, tennis, volleyball at the local gym, library books instead of buying, walks on the beach, hanging with friends at homes instead of bars,

Answer 2

Unfortunately, damaging credit can take place easily and quickly, whereas repairing it can be a more lengthy and challenging process. My first suggestion would be to utilize your free annual credit reports, and use them to initiate challenges with everything derogatory on each of them. You need to order a separate report from each bureau (TransUnion, Equifax, and Experian) and the ID number will be your gateway to doing the online challenges. In general the bureaus wrap up these investigations in about 30 days or so, and delete everything that has been challenged, unless it has been substantiated by the creditor that reported it. After that has taken place, you will then most likely have a smaller batch of problems to resolve. Find a good mortgage consultant (like me - but I'm not advertising) who can then work through the process of identifying where you will get the most "bang for the buck" in anything you decide to pay off. Also see if someone with established credit will add you as an "authorized user" to their accounts - this should have the effect of raising your score. As far as applying for new credit, try the gas companies, as they can be lenient on their extension of credit - and also consider a small secured card. Make sure to get one with the least painful fees and one that does not charge a "monthly participation fee." Finally, make sure that your revolving debt (credit cards) accounts are half or less of the approved balances - 33% or less is probably ideal, but use the "half or less" as your rule of thumb. So, if your approved limit is 1,000 on a given card, make sure that your balance is less than 500, etc. The process can take a bit of time, but it is very possible to accomplish the turnaround you seek. I hope things work out for the best!

Answer 3

If you have bad credit, you will be in a much better position to secure a loan if you can come up with 20-25% down payment for the property. The lender wants to see that you have skin in the game, your unlikely to default the loan if you will be out a significant amount of money.

Lenders are very gun shy about taking out risky loans right now.

Answer 4

Absolutely start working with a mortgage lender now. They can take an in depth look at your credit history and identify the issues that can prevent you from getting a loan. If they want to earn your business, they will suggest things you can do to correct your credit.

Answer 5

Contact mortgage guy, get a copy of ur credit report, he will help you identify and pay off your debts, some debters will take settlements, where you pay a lesser ammount to close the debt. You will be able to but a house if you take care of all this but you will not get the best intrest rate.

Answer 6

its impossible i went to buy a house 2 months ago for $350,000 i was willing to put $150,000 down and they could not get me financed because my credit score was only a 690 i also proof of $160,000.00 a year income it takes a long time to repair credit i hae not defaulted on a loan, car payment or had a repo in the last 10 years and my score has not gone up

Answer 7

IF you never owned a home you can get assisted help with first time home buyers, talk to a realistate agent they can help you get hooked up with pre approval. My G/F just bought a house and she had declared bankruptcy like 3 or 4 years ago. SHe bought a 147k house with 0 downpayment

Answer 8

in addition to cleaning up credit, you need to save a lot of cash for down payment and closing costs also - 6 months isn't realistic to clean up everything - shoot for 18 months

Answer 9

there are a couple of groups out there that can help:

NACA-naca.com
ACORN-acorn.com

these group help people with bad and no credit get house thru special grants. some grants do not require a downpayment or closing cost.

Answer 10

try FHA they take 2.25% as a down payment.

you cant have any credit lates in the last 12months...otherwise you should be fine