This was posted nearly 7 years ago,and I have previously answered this,but would like to add some more advise and very specific action steps to help you,or others, reading this post that are in a similar situation.
Remember,buying a home is not like renting. If something breaks,you have to fix it.You have to have enough contingency money to cover repairs. Also,too many mortgage calculators online only help you figure out principal and interest. However, you also need to add "escrow"re items of taxes,insurance and PMI. Figure PMI as being 0.9% of your loan.So when you are budgeting your monthly mortgage payment, be sure to take all these factors into account.
1.Consider having 1.5% of the purchase price as a cash reserve,in a money market account.
So if the purchase price is for example,$200k means having an emergency $3k in a separate account. This is above and beyond your 3 to 6 months cash reserve.
2.Pay off your credit card debt completely and car loan debt.
3.Put the monthly payments you were previously making into savings until you have at least a 3 month cash cushion.
4.Do not buy a property at more than 3 times income. For example,if you make $80k/year, you
can max out at a $240k property. Don't buy more than you can afford.
5. Try to save at least 10% down. If you can,15% down or 20% down is even better. This is separate from your 3 or 6 month cash reserve. This is money to buy something.
6. Try to live only on cash. Don't use credit cards. You don't need them.
Basically,a healthy FICO score shows how well you manage debt. You can dispute wrong info on your credit report. But a healthy FICO score is a measure of how much you love debt,not how well off you are,or how well you handle money,and not if you have a 401k,or savings,or anything.
So credit improvement and repair is all good and then getting an FHA loan once your score is around 650,but what is more important is changing any bad habits that got your credit score low in the first place.... more