Financing in Cayuga County>Question Details

Mhyde845, Home Buyer in Cato, NY

Is it possible for someone with a low credit score to get a loan, from somewhere other than a bank.?

Asked by Mhyde845, Cato, NY Sun Oct 2, 2011

Our rent is so much more than we would pay for a mortgage, so it only makes sense to buy a home, our kids are young and it's important, however my husband is the only one that works. Our credit isn't good though. Thanks

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There are other factors besides credit that determine qualification, such as income, debt, etc.; therefore if you haven't done so yet, do visit with any loan officer; at the very least you'll know what needs to be done in order to qualify in the near future. You can begin with the bank you currently do business with, any other banks, credit unions, mortgage brokers, etc. In the meantime do work on your credit, dispute any negatives, keep credit cards below 50%, pay all bills on time, pay down debt, possibly pay off old debt....
0 votes Thank Flag Link Mon Oct 3, 2011
Hi Mhyde845,

I suggest you speak with a mortgage professional in your area about your options. There are lenders who offer FHA loans with below 600 credit scores.

Best wishes,
Elva Wormley
C2 Financial Corporation
0 votes Thank Flag Link Sun Oct 2, 2011
If you don't know where to get a loan to buy a home, or what financing terms would be available... how do you know that your "rent is so much more than [you] would pay for a mortgage"? How do you know it makes financial sense to buy a home rather than rent a home? When you said it's important for your kids for you to own a home, did you mean that having a stable environment for your kids is important/you don't want to have to move around all the time?

What is going on with your "not good" credit? Are you having issues making your payments/paying your bills lately? Was it awhile ago? What has changed, and how long has it been since things have changed?

Have you attended a homebuying class and completed a detailed budget to determine what type of expenses you could expect and how much you can afford to spend on those items? HomeHQ in the Syracuse area offers one for $50 per couple (both of you should go no matter if only one of you makes income) - http://www.homehq.org/

Alternatives to getting a traditional mortgage:

1. Seller financing - this is where a seller owns their home free & clear (no mortgage), and they play the part of the mortgage lender. This does limit the homes you can purchase to homes that are owned outright by sellers & are willing to do seller financing. In slow markets, where the transient rate is low (meaning people stay a long time in their homes/own their homes for awhile), I have found these to be more common. Usually need a nice sized down payment (5-10%) and often you will need to refinance/pay off the mortgage within a few years.
2. Contract-for-deed/land contract - this is like you buying the home with a mortgage from the seller, but the title stays in the seller's name, and often sellers still will owe a small mortgage on their home (smaller than the land contract amount you have taken out with the seller). Puts you into a vulnerable position because the title is not in your name, you don't know if title will be clear at the time you refinance the home into your name.
3. Private/hard money - available on non-owner occupied homes primarily, some lend on primary residences, significant down payment (35%+) is needed and interest rates & costs are very expensive, typically require you to refinance/payoff the mortgage within a few years.
4. Lease option to buy - like a rental contract with an upfront down payment, and you have the option to purchase the home by a certain point in time for a predetermined purchase price. Can put you into a tight spot since you are using a purchase price that may not be able to be supported by an appraisal when you exercise the option to purchase the home.
5. Investor financing - becoming more popular, which is where a real estate investor buys a home for you and then sells it to you using one of the above methods.

Real estate investing clubs would be a good source for alternative financing sources, http://reicny.org/ is one that meets in Syracuse.
0 votes Thank Flag Link Sun Oct 2, 2011
It is not easy to find but you could try to find a homeowner that owns their home free and clear and willing to hold a note (Finance the mortgage with you) If so you could have an attorney and/or title company draw up the paperwork for you. If you have a good agent that thinks outside of the box they might be able to keep a good look out for you if they happen to come across one. You could also search Craigslist for owner finance deals.

If you can negotiate the price and/or terms you might be able to work something out. I think it might become more popular in the near future. A lot of people don't have stellar credit these days. So stay positive and l know your not the only one. I like how you are thinking outside of the box . A lot of people are afraid to do this. So congratulations
0 votes Thank Flag Link Sun Oct 2, 2011
Yes, it's possible....through private lenders (hard money lenders), or someone that will provide owner financing for a property. I agree with Dan in that these types of loans carry higher interest rates as well as down payments. They are not as attractve as traditional mortgage plans. If you can correct the issues keeping your credit score at a low level, that would be preferable...and would save you big $$.
0 votes Thank Flag Link Sun Oct 2, 2011
Mhyde,
My first suggestion is to consider addressing the issues with your credit. Getting a loan with credit issues already will come at a high expense if it's possible. Your options would likely require a larger down payment and higher interest rates over a shorter term.
Rather than do all this and then still have to improve your credit to refinance the home at a later date, consider getting your financial situation in top shape. Pay down any revolving balances, use your credit, but keep everyone paid on time, dispute any inaccurate information you find on your credit report in writing with each of the agencies that report it.
It may only take a few weeks or a couple of months but you can make a big difference and help yourself in the long run.
0 votes Thank Flag Link Sun Oct 2, 2011
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