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Posted: 12/30/2002 8:00:12 AM EST
So, I got engaged just before Christmas (best descision I've ever made..), and now we're talking about buying a house instead of renting right off the bat. Problem is, my credit is shit thanks to some very stupid financial mistakes I made in my mid\early twenties. Her credit is pretty darn good. I'm the primary breadwinner in that I make alot more than she does. My payments\activities have all been solid in the last year or so. What I'd like to ask you fine people with experience in buying houses is, how much impact does your credit score\history have on getting a mortgage? I've heard some varying opinions, but most seem to want me to believe that even with bad credit, I can still get a loan for a house. Should I just give up on the idea of buying for a few years? Can it be done with bad credit? Are there pitfalls in doing so? Is FHA a good thing to try? Personal experiences would be great to hear. I'd really appreciate it! --ZERO
Link Posted: 12/30/2002 8:11:29 AM EST
Congratulations. There is a direct relationship between the amount of money you put down on a house and how much slack they will cut someone with bad credit. The more you put down the more things they tend to overlook on your credit report. From I remember, bad credit stays on your file for 6 years and nine months. Judgements and liens remain for as long as the creditor renews them. I had bad credit in my early 20's and had to put our first house in my wife's name only. After a few years we refinanced with both names on the title.
Link Posted: 12/30/2002 8:15:47 AM EST
Thanks FlGreg. Very good info to know. So, when you put your first house in your wife's name only, were you able to include your income in consideration for the loan? I ask because with my lady's income alone, there's no way we could get a loan.... --ZERO
Link Posted: 12/30/2002 8:23:45 AM EST
I was in the same boat, and managed to buy on a land contract. If you're a veteran, the VA might be able to help too. There's also a group called Fannie Mae that specializes in helping people with bad credit get loans.
Link Posted: 12/30/2002 8:25:39 AM EST
I do not remember to be honest with you. I would speak to a mortgage broker and see what they have to say about it. This is a house and not a stereo system. Bankers know that this is a major purchase and someone who is married, etc. is less likely to default on the loan. You may have to pay more on the downpayment or have mortgage insurance for a few years (or whatever it is called - you pay a small premium that insures that the loan will be paid off if you default on it). I am sure someone in the AR15.Com Army will be replying with more up-to-date info than I have on this.
Link Posted: 12/30/2002 8:41:52 AM EST
Bad credit can really hurt your chances of getting a mortgage loan unless you have alot of cash for down payment. Get with a agent and they will see what the situation is. If you have alot of cash you could always get into a house that has a "no qualify" type loan, which does not care about your credit record, only that you have the cash to take over the loan.
Link Posted: 12/30/2002 8:48:05 AM EST
It can certainly be done, but you need to beware of "predatory lenders" as well. FHA loans are great for first time buyers who otherwise would not be able to secure a home loan. FHA also has Access programs to help with down payment assistance if it can be applied to you, basically carrying a small second mortgage. I would talk to your primary bank first, if possible, then go the route of a mortgage broker if needed. FHA loans do carry extra insurance over a conventional loan (it protects the lender in case of buyer default), but you can lose this extra cost by refinancing with a conventional loan after making timely payments after several years. Your loan officer or mortgage broker will sit you down and present your options to you-sometimes it pays to wait a year to obtain a conventional loan via timely payments reported to the credit bureaus (I don't know your specifics and I don't need to), or you can go for a loan now, but I would advise to fight for the lowest interest rate that you can get, especially since rates are still low. Good luck.
Link Posted: 12/30/2002 8:51:17 AM EST
Yes, one can get a house with TERRIBLE credit if one is willing to do a few things. 1) Need to put > or = to 20% down. 2) Will prob not get those great ~6% financing rates currently out there, you may get somthing like 7.5%. If not for todays really really low rates, 7.5 is not that bad at all, just seems high with the CRAZY rates avail today. With that said, buyiung a house is the BEST thing you can ever do. Sorry, but renting is not a good idea and gains you nothing in return...BUY BUY BUY!
Link Posted: 12/30/2002 8:53:20 AM EST
[Last Edit: 12/30/2002 8:56:53 AM EST by mikr]
PMI, or private mortgage insurance, is generally required for loans until you reach 20% in terms of equity. FHA carries additional mortgage insurance as I understand it, but I could be mistaken-I read all the time in Real Estate about FHA loanees being prompted to refi with conventional to "lose" the extra coverage and for the rest of us to make sure we drop the PMI when we reach 20% in equity. Keep us posted, and we'll help out as/if needed with advice-I am sure we have some real estate/loan people on the boards here. Another thing to do is find out your FICO score, and check both of your records for ANY inaccuracies that may hurt your rating. Report them to the bureaus ASAP. Sometimes people believe their credit is worse than it actually is, and a loan officer or mort. broker will be able to tell you the specifics then.
Link Posted: 12/30/2002 9:01:14 AM EST
Originally Posted By FLGreg: Congratulations. There is a direct relationship between the amount of money you put down on a house and how much slack they will cut someone with bad credit. The more you put down the more things they tend to overlook on your credit report. From I remember, bad credit stays on your file for 6 years and nine months. Judgements and liens remain for as long as the creditor renews them. I had bad credit in my early 20's and had to put our first house in my wife's name only. After a few years we refinanced with both names on the title.
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FLGreg is absolutely correct...I did the exact same thing. We are now down w/a 5.5% ARM. Put enough down %wise and a convicted AXE murderer can get a mortgage.
Link Posted: 12/30/2002 9:03:26 AM EST
Yup, less then 20% down will require PMI, unless you split the loan up. As an FYI...anyone who bought a house say 3 years ago or more, and pay PMI....Get the house Re-appraised, the way housing has gone up, I guarantee you will be at the 80-20 ratio, requiring your Mortgage Co. to drop teh PMI....PMI is a killer, money down the drain, can't right off, PMI...
Link Posted: 12/30/2002 9:05:13 AM EST
One other thing-if you do go for a loan-lock it in on a FIXED rate-do not go adjustable (ARM) at this time, the Prime Rate is lending to some very favorable lending rates right now, and I don't see them falling much further, but instead to possibly/probably start climbing back up.
Link Posted: 12/30/2002 9:09:54 AM EST
So you can actually purchase a home with bad credit? Lets say I have about 80k in my checking account but ive never had a real job, what are my odds in getting a home in the 175-200k range?
Link Posted: 12/30/2002 9:13:04 AM EST
yes, it can be done with bad credit. 1- Be ready to put down more than 20% deposit. 2- Be ready to pay a higher rate. Let say that your house worth $150,000.00 on the market, the bank is willing to let you borrow $100,000.00 or less. You will have to put up the rest. The banks are not stupid, they just want to recoup the loan money if in case you forfeit on your loan. They can quickly put up your house for sale at let say $120,000.00 (below market value for quick sale) and that will recover their loan money plus expenses.
Link Posted: 12/30/2002 9:16:31 AM EST
Originally Posted By QuailCountry: So you can actually purchase a home with bad credit? Lets say I have about 80k in my checking account but ive never had a real job, what are my odds in getting a home in the 175-200k range?
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If you are putting the $80K down, see W-W's comments about "axe murderers" above. You should have no problem with a "no doc" loan. Just make sure that the house will appraise for what you are paying for it (usually not a problem).
Link Posted: 12/30/2002 9:23:46 AM EST
Yes you can get a loan with bad credit or not even a job. I had a friend who lived off his dad, well his dad built him a house in a exclusive part of town, just outside city limits, paid cash for thing, well my friend just loafed around and decided one day he wants about $50,000.00 so whats he do, borrows on the house that was paid for, keep in mind he had no job, would not work, he could, just would not. Well he never made a payment and bank got the house, his attiuded was so what I will just get dad to build me another. Now I would go the fixed rate, I built my place in 98, and got a great fixed rate, 6.58%, I t was going to be higher but the bank never locked me in, and the rates keep going down and on the day of closing I got a good rate. It is more difficult for a single person to get a home loan, I know I am single, the banks seem to think that only married people get home loans, they could not understand why I was wanting to build a house, also have all your finacal papers ready, pay-check stubs, income tax returns, current checking and savings info, 401k info, any assests you have. Good luck and hope you get the house you want.
Link Posted: 12/30/2002 9:29:16 AM EST
Thanks to all who've replied so far....a bigger help than you know and we ceratinly appreciate it! I think our problem is going to be the down payment. I certainly don't have 20% of what we're looking at in cash at the moment. And less than $120,000 to $150,000 is not much house at all in my area. It's looking like we'll have to look at FHA loans or try to find a family member with a soft heart and fat wallet. We're going to talk to a couple loan officers today with credit unions we are both already members of and in good standing with. Please keep the info\advice coming and I'll provide updates...... --ZERO
Link Posted: 12/30/2002 9:30:09 AM EST
Originally Posted By mikr: One other thing-if you do go for a loan-lock it in on a FIXED rate-do not go adjustable (ARM) at this time, the Prime Rate is lending to some very favorable lending rates right now, and I don't see them falling much further, but instead to possibly/probably start climbing back up.
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Fixed V. ARM is a factor of the BORRORS AGE...for 30'yo's a 30 fixed makes sense. For 50 yo's an ARM makes better sense if you use the extra funds for other things like investments or kids college, etc.
Link Posted: 12/30/2002 9:30:22 AM EST
Oh yeah!!I forgot that-your last three year's W-2s, and at least two months worth of bank statements, SS card, DL, etc., all that good stuff-I forgot all about that, good reminder!.
Link Posted: 12/30/2002 9:33:35 AM EST
Originally Posted By W-W: Fixed V. ARM is a factor of the BORRORS AGE...for 30'yo's a 30 fixed makes sense. For 50 yo's an ARM makes better sense if you use the extra funds for other things like investments or kids college, etc.
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I was figuring he was in his late twenties to mid-thirties at the latest. My in-laws (in their late 50's) just refi'd at 5.75% FIXED. Prior to that they had an ARM-go figure.
Link Posted: 12/30/2002 9:42:26 AM EST
Give me a call @ 505-821-6723. I am a mortgage broker and can get you pre-approved in just a few minutes.
Link Posted: 12/30/2002 9:53:39 AM EST
Also try and get pre-approved, nor pre-qualified (which is a worthless piece of paper). A pre-approval letter, once acquired, can be worth its' weight in gold when you go to make an offer on a house which may have multiple offers-a pre-approval can help to remove a "financial contingency" when a seller reviews offers in his/her hands.
Link Posted: 12/30/2002 10:00:37 AM EST
Originally Posted By wiggy762: Give me a call @ 505-821-6723. I am a mortgage broker and can get you pre-approved in just a few minutes.
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There ya go right there. This is what I LOVE about this board! I don't care how off the wall the question, Or what you're looking for, someone is gonna pop up with the right info....
Link Posted: 12/30/2002 10:03:56 AM EST
If you can go VA, that's the way to go in my opinion. When guaranteed by the VA, lenders allow for a higher debt to income ratio and are often more forgiving of past bad credit. We didn't exactly have sterling credit when my wife and I bought our home 7 years ago, but we were still able to get approved for a loan in excess of $200K and wound up buying a home for $155K for only $700 out of our pocket using my VA loan benefits. I was both amazed and ecstatic. Buying your home is SUCH a nice feeling as opposed to throwing away money on rent and having to live in a home under someone else's terms.
Link Posted: 12/30/2002 10:05:47 AM EST
Originally Posted By Boomer: Buying your home is SUCH a nice feeling as opposed to throwing away money on rent and having to live in a home under someone else's terms.
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Absolutely. [:)]
Link Posted: 12/30/2002 10:09:01 AM EST
[Last Edit: 12/30/2002 10:14:12 AM EST by FireControlman]
I'm no expert here, far from it but - real estate agents want to make money. I've had two seperate instances of guys telling me they "work with the lenders" and would get me house even when I was 19 and had no job. My neighbor is a real estate agent and he agrees with me that there is a lot of crooked people that could put anyone in a house.
Link Posted: 12/30/2002 10:26:45 AM EST
Originally Posted By FireControlman: I'm no expert here, far from it but - real estate agents want to make money. I've had two seperate instances of guys telling me they "work with the lenders" and would get me house even when I was 19 and had no job. My neighbor is a real estate agent and he agrees with me that there is a lot of crooked people that could put anyone in a house.
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Are you insinuating something here? If so, rest assured that I am not a real estate agent but instead am a loan broker....I am the lender for all intents and purposes. I do make money on the closing of the loan, but not near as much as a real estate agent. BTW, unless Mr Zero buys a house in New Mexico, or able to qualify for a Conventional loan, (unlikely with the reported rough credit), I will not make anything on his loan. I only offer this pre-approval as a courtesy (read, FREE), to my fellow brothers on AR15.com. Once I get them approved, I then provide that approval and my contact information to the customer so that they can go to their local lender/broker and get the loan finished. I'm just really good and have multiple nationwide resources to help get most everyone done. If you were not meaning a slight....then disregard.[:D]
Link Posted: 12/30/2002 10:36:32 AM EST
Originally Posted By QuailCountry: So you can actually purchase a home with bad credit? Lets say I have about 80k in my checking account but ive never had a real job, what are my odds in getting a home in the 175-200k range?
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Yup, if you put ~25-30% down, they don't give a rats ass who you are....A house is somewhat of a secure loan, you can't put it in your car and drive off with it. now, you can trash the property, however, that 25-30% you put down will cover that damage and some. CASH IS KING!!!!!
Link Posted: 12/30/2002 11:21:04 AM EST
wiggy762 - [b]Relax[/b] my post had nothing to do with you !
Link Posted: 12/30/2002 12:40:22 PM EST
Originally Posted By FireControlman: wiggy762 - [b]Relax[/b] my post had nothing to do with you !
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Sorry, Pretty swamped here with the end of month/year and everyone is breaking my balls in an attempt to close before the end of month and to top it all off, one of the main banks that I use i having catastophic computer failures and cannot produce the documents my customers need to sign for closing. I am sorry for jumping on you like I did.[:D]
Link Posted: 12/30/2002 12:54:43 PM EST
In addition to putting money down, money that you have in reserve such as a 401k or other retirement account will increase the chances of getting a good loan. Also if you know you have bad credit then don't buy the house you would like to live in, buy one that will work until you get more saved up and can clean up your credit. At least that way you won't be burning your money on rent, you will probably be able to fix up the place, and in a year or two the house will have increased in value.
Link Posted: 12/30/2002 1:02:47 PM EST
Originally Posted By 1shott: Yes you can get a loan with bad credit or not even a job. I had a friend who lived off his dad, well his dad built him a house in a exclusive part of town, just outside city limits, paid cash for thing, well my friend just loafed around and decided one day he wants about $50,000.00 so whats he do, borrows on the house that was paid for, keep in mind he had no job, would not work, he could, just would not. Well he never made a payment and bank got the house, his attiuded was so what I will just get dad to build me another.
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Argh. Leave us hanging there. Well... did Daddy get him another house??? [:)]
Link Posted: 12/30/2002 1:12:45 PM EST
Again, thanks everybody! Wiggy762: Thank you for the very generous offer. I'll talk to my lady and contact you soon. Yeah, we're looking for something that has enough room and that we can afford, not our dream home. At this point I'm just hoping we can get a loan at all without getting too much of a buggering on fees\interest. We're on the phone right now with USAA (her grandad was a Liberator bomber pilot in WW2) as a matter of fact trying to find out how well we will fair. --ZERO
Link Posted: 12/30/2002 1:24:25 PM EST
Well the W-2 thing could be a problem. Would I be better to just hold on to my cash and wait for interest rates to go back up and house prices to tank? I mean where I am homes are around 200k for an average home in a decent neighborhood. Im looking for something with at least 3000 sq feet and the price for that is absurd right now
Link Posted: 12/30/2002 1:26:37 PM EST
If you are in DFW, I know a guy who owns a morgage company. He is a really good guy and I coach his son, he has worked with people with credit issues before. Email me if the other options do not work out(and you are in DFW).
Link Posted: 12/30/2002 1:31:14 PM EST
Originally Posted By pdxshooter:
Originally Posted By 1shott: Yes you can get a loan with bad credit or not even a job. I had a friend who lived off his dad, well his dad built him a house in a exclusive part of town, just outside city limits, paid cash for thing, well my friend just loafed around and decided one day he wants about $50,000.00 so whats he do, borrows on the house that was paid for, keep in mind he had no job, would not work, he could, just would not. Well he never made a payment and bank got the house, his attiuded was so what I will just get dad to build me another.
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Argh. Leave us hanging there. Well... did Daddy get him another house??? [:)]
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I was told daddy came thru again for him, this time in Arkansas, that friend and I had a falling out in late 98.
Link Posted: 12/30/2002 2:58:34 PM EST
Originally Posted By usma89: If you are in DFW, I know a guy who owns a morgage company. He is a really good guy and I coach his son, he has worked with people with credit issues before. Email me if the other options do not work out(and you are in DFW).
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Thanks for the offer, but I'm in Austin. I do appreciate the thought though! --ZERO
Link Posted: 12/30/2002 3:36:23 PM EST
Same story here... Really BAD credit, good job, new marriage... I put approx. 30% down and with minimal effort got approved for NQ (non qualifier) fixed rate loan - in my case that was 1% over than current rate (7.125% over all) + I had to pay 1 point (1%) in extra fees. Was it worth it - YOU BET...
Link Posted: 12/30/2002 3:55:30 PM EST
Link Posted: 12/31/2002 6:28:56 AM EST
FMJunkie, No problem at all. There are really two options, Conventional and Government (FHA & VA) loans. I have access to an automated underwriting system that provides approvals from Freddie Mac and Fannie Mae, (these are the two largest Fed run mortgage lenders). Once a person is approved through either of them, they are able to place their loan with almost any lender nationwide. This automated system will give either an approval or denial for either a Conventional or Govt. loan. If the approval is Conventional, I can finish your loan regardless of the state. But if the approval is Govt., I have to give the loan to an FHA lender in the state you are buying in. There are several differences between Conventional and Govt. loans, mainly that Conventional loans are harder to get due to credit criteria.
Link Posted: 12/31/2002 5:10:34 PM EST
When my wife and I got married she had a lot of credit debt and then we got hammered by being in the 40% tax bracket with no write-offs. We wanted to buy a house quick but didnt have the 20% down. What we did was get a second to cover the 20% down at the same time as the first. This way we didnt hardly any down payment and no PMI. After a couple of years, we refianced at a lower rate and got rid of the second. Buying the house this way was very beneficial as we got $10,000+ back in taxes that more than made up for having to get that second
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