Financing in Racine>Question Details

Sarah, Other/Just Looking in Racine, WI

I would like to buy a house, but I was discharged from a bankruptcy 16 months ago and my credit score is only 507. I also have a large amount of

Asked by Sarah, Racine, WI Mon Jan 4, 2010

deferred student loans, but I will not have to start paying on them fir at least 3 years. Do you have any suggestions for me? Idealy, what is the minimum credit score I could have and still get a decent rate? How will my student loans affect me?

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Monir, thank you for your responce. Fortunately, since I originally posted this, I have raised my middle credit score to 664 and am currenlty set to close on my home on November 3.
0 votes Thank Flag Link Sat Oct 9, 2010
Hi Sarah, you barely qualify and your best rates are going to come at 580+, ideally 620+. Credit repair with is an option. Will take 4 to 6 months plus follow up on your part.

I also got two relevant things for you to read -- this is a blog excerpt from Bill Zielinski...


The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

* To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.
* Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.
* All borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing.

HUD’s newly introduced minimum credit score and loan to value requirements will apply to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.

The new credit requirements are not expected to dramatically change the number of FHA mortgage approvals. Most lenders had already imposed a minimum credit score requirement of 640 or higher for FHA borrowers. In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.

Many potential FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580. The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders. Despite the FHA insurance, banks do not have an iron clad protection from loss.

... rest of that blog at…

And I wrote a 10 part blog called "Top 10 Credit Myths" which is good..
0 votes Thank Flag Link Sat Oct 9, 2010
Hi Sarah

In addition to the sound advice already given, if a property/home was also included in a Chapter 7, you will then have to wait an additional 24 months ( 3 years total) from the date of discharge. Again, so long as you can show that your student loan will remain in deferment 12 months from the date of closing on your home, you'll still be fine.
0 votes Thank Flag Link Mon Jan 4, 2010
The type of bankruptcy affects how long you have to wait to be able to purchase a home. If you ahd a Chapter 13 bankruptcy, you must wait at least 12 months, and obtain permission of the bankruptcy trustee or the court to be able to get a mortgage. If you have a Chapter 7 bankruptcy, you must wait at least 24 months. In both cases, you can not have any lates on any accounts since the bankruptcy.

Before you go house hunting, you should focus on resolving the issues that brought your credit scores down. Generally, virtually all lenders require that your credit scores be at least 620. To get the best rates for an FHA mortgage, your credit scores must be 680 or better.

FHA is currently working on establishing mininum credit sxcore requirements. You should keep an eye on those changes to see they might affect you and your situation.
0 votes Thank Flag Link Mon Jan 4, 2010
Ideally for an FHA, the minimum credit score for most investors is now 620. This should be your minimum middle score. You might find that you won't get the best rate until you hit the 650 or 680 range. Keep in mind that FHA does not currently have a stated minimum credit score. It is on the investor end that minimumm score requirements are being enforced. FHA has had some discussion about a minimum but have not implemented one yet. Student loans do not have to be counted against your income if you can prove that they are deferred for at least the next 12 months. Get to work on your scores. You'll find that they will start coming up but it won't be over night. Good luck.
0 votes Thank Flag Link Mon Jan 4, 2010
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