Credit Score in Taos>Question Details

Josejose, Other/Just Looking in Taos, NM

how does my bad credit affect my ability to purchase a home?

Asked by Josejose, Taos, NM Tue Dec 22, 2009

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Monir Mamoun’s answer
Josejose, "not well" is the answer. You gotta have a score of 620+ to get the best rates. You could work with a credit repair company like LexingtonLaw.com to fix it. You should be able to get into the upper 600s or 700s in a few months if your credit is not a complete disaster. They can fix a lot for you -- make sure you keep on top of it though.

You can read my blog series Top 10 Credit Myths at the link below. Good luck!
0 votes Thank Flag Link Sun Oct 3, 2010
Why don't you take some time now and work on optimizing your credit scores to be as high as they can be before you think about purchasing a home? It will literally save you thousands of dollars in the long run. It's really not all that difficult or time consuming.

For a simple 8 step system to repair your credit, along with step-by-step videos that guide you through the entire process easily, visit http://www.RepairCreditTrauma.com.

If you have any questions, feel free to ask!
0 votes Thank Flag Link Tue Feb 16, 2010
It definitely doesn't help but you're not out of the game. Look into doing a lease/option or rent to own with owner or assumable financing (so you don't have to qualify for a bank loan) You put up a non-refundable deposit of $2000-$5000 and your rent payment builds toward down payment and closing costs for 1-5years.

Erik Overn
investaos@rocketmail.com
0 votes Thank Flag Link Mon Feb 8, 2010
About the same way that broken ankle affects your ability to run track.

Along the same lines, before you can get back in the race, you have to heal, rehab, and establish a good training program. In your case, you have to mend your credit and establish a good payment history again.
0 votes Thank Flag Link Tue Dec 22, 2009
Jeff, you are correct about cutting up credit cards. Even worse is when people cancel all their cards. If someone doesn't have any active tradelines it makes their situation a whole lot worse.

The reason I tell people to take a class is because of the psychological factor or the discipline issue (whatever you want to call it).

I used to tell non-qualifying clients to get material to read from the library or get information online.

When I would follow up with them they would tell me that they don't have time. I have found it much more effective to send them to a free class so they put it in their calendar and actually attend.

In truth though, you can much more information online or through books than what is given in these classes.
0 votes Thank Flag Link Tue Dec 22, 2009
As you've seen by now it's super important. If your credit is poor enough then you can't borrow at all. If it's merely ok, then it costs you more to borrow.

It is very much in your best interests to get and keep a good credit rating. Note: cutting up or canceling your credit cards usually will hurt, rather than help you.

You may easily Google how to attain good credit, without a fancy class or giving anyone at all your money.

Good luck!
0 votes Thank Flag Link Tue Dec 22, 2009
Your bad credit can affect you in many ways when buying a home.

Besides for possibly not qualifying because of a low score, many people with low credit pay more for their car loans and credit cards.

A larger percentage of your income will be taken up by these higher bill, leaving you less income to use to qualify for a mortgage.

For example, if you earn $3000 a month, you might qualify for a mortgage of $1500 per month (taxes and homeowners insurance inclusive). If you have $300 monthly minimums in credit cards and a $400 monthly car payment, you will only qualify for a payment $800.

People with good credit pay less for their other debts, allowing them to borrow more money, while people with bad credit pay more for their other debts so they can't borrow much.

Generally when someone has bad credit, even if their score is high enough, they may have collections and judgements as well on their credit report and most of these would have to get paid off before getting a loan.

If someone has bad credit there are ways to clean it up. They should take a credit counseling class offered by many organizations in most states.
0 votes Thank Flag Link Tue Dec 22, 2009
Life after you reach age of 18 credit scores will run your entire life.

If you have negative issues over 2 years best address those concerns for home purchase. If negative items are less than 2 years old not much can truly happen BASED on number of reasons, what issues are.

Lenders look at ability repay loan, as if you were loan a personal friend money, if they can't get obtain a loan from a bank why risk your hard earned money on a person who is risky

If your scores are 620 and above, ability pay 3.5% or more down payment, amount owed and income are in balance , 2 year employment history you may not have any problems

Each month you pay your bills on time your credit scores increase.

Higher credit scores better off your life is, you have lower interest rates on anything you want to purchase banks are happy to do business with you.

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911
Lynn911

http://www.lynn911.com
0 votes Thank Flag Link Tue Dec 22, 2009
As mentioned, it does affect your interest rate and the cost of Money. In New Mexico it's possible to try and purchase something through a Real Estate contract, which is essentially an owner financing tool. It will typically balloon or come due after several years, so if this is the route you go, it is best to try and repair your credit prior to having it refinanced after several years. Beginning next year, I've been told that you can't get a "pre-qual" letter without first identifying a property to purchase, so best to do it before the new Years.
0 votes Thank Flag Link Tue Dec 22, 2009
That depends on how bad your credit is. With the current housing crisis, the FHA has been a little more forgiving, but you'll pay a penalty in higher interest. The easiest thing to do is to contact a local Taos mortgage broker and get pre-qualified. There's no obligation or cost, and you'll get a rundown of what you can and cannot qualify for in our market.

Jim
0 votes Thank Flag Link Tue Dec 22, 2009
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