Financing in Minneapolis>Question Details

Seekingahome, Home Buyer in Minneapolis, MN

Married and we want to make our first home purchase but... I'm working and have bad credit (600) and I am the current wage earner. Can we get a?

Asked by Seekingahome, Minneapolis, MN Wed Jan 12, 2011

loan? Spouse has good credit (720 ) but no income. We have 30k to put down towards the purchase.

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Dear SeekingAHome . . .

I posted what I thought was a great answer back last Wednesday. Well, I have updated news for you! I wanted to share this last Friday, but needed to wait until it was all 100% official before sticking it out here on the internet. I am sure you understand. And remember, I am an expert in real estate; I am not a loan officer.

Rather than re-type the information for you, I am going to paste in here what i just now posted on my Facebook page. So here is the entire story for you and I hope it thrills you. I shared your story with my loan officer and he would be more than happy to explain it all to you. And by the way, this was in response to a woman asking me a question about this program and wondering if Edina Realty Mortgage (via Wells Fargo) offering loans for people with lower credit scores was a "good idea" or not. Here goes . . . .

Yes, Carrie . . . absolutely it is a good idea. Wells Fargo is piloting this. They were the ONLY bank through that whole mess we went through that stayed in the black. It's because they were very careful and did not get heavily involved in subprime loans, and that is where Edina Realty Mortgage gets their money. That's also why ERM proudly can say that they contributed little or nothing to that crisis.

They have very carefully studied the statistics and demographics on loan defaults. And thus they have specific and special guidelines for these loans to reduce the risk of default.

So here is how it works . . . the borrower must mee the following criteria:

• Purchase transactions only- refi's not allowed
• No gift funds are allowed
• No DAP's are allowed
• Must have either 5 or 10% down payment, sourced and seasoned
• Stricter debt ratios and potential reserve requirements

The target customer for this program is someone who has challenged credit, but has the necessary down payment and reserve requirements. As far as I know, Edina Realty Mortgage is the only lender offering this program! Utilization of this program could add as much as 25% new business!

So let me recap for you . . . .

Virtually all lenders have a minimum credit score of 640. there are a select few that can go down to 620. Only Edina Realty Mortgage and Wells Fargo can go down to 600. That has been in place for awhile. And this is for a FHA loan with 3.5% down payment.

This new rule allows someone with a score between 580-599 to get a FHA loan, but they must put 5% down and it must be THEIR cash.

It allows someone with a credit score between 500-579 to still get a FHA loan, but requires at least 10% down.

The way it was explained to me was simply that based on statistics, with property values increasing steadily now, and the fact that these buyers put in a decent amount of their own cash, there is a minimal risk of default. But as I shared above, the other caveat is that there are slightly stricter debt to income ratios and other reserve requirements.

That all said, remember that I am NOT a loan officer. I am an expert in real estate. But in order to be an expert at what i do I need to have my arms around all of this information to properly guide buyers and keep them informed. I'd be glad to refer you to a good loan officer who can answer any questions you or anyone else has. I try to stay out of all that.

That said, would you like to know an interesting statistic? I actually have my notes from a session I attended last week. Check this out . . .

In a national survey by the NAR, 88% of first time home buyers believed that applying for a mortgage would be very difficult and did not feel they would qualify.

68% said later - after the fact - that it was "not at all difficult".

And the best part: ONLY 5% OF THEM DID NOT GET APPROVED!!

Translation: the vast majority of first time home buyers, almost 90%, did not beleive they could get a loan. Yet 95% of them were approved for a mortgage! Isn't that crazy???? I believe this is all because they watch too much "slanted" news reports that are drawn out and sensational.

So if anyone else out there is reading this, please stop second guessing the market. Stop paying rent and get approved for a mortgage and go buy a nice home! The home affordability index is the highest it has been in over 50 years, the rates today (literally today) are lower than the average daily rate through 2010, and the home prices bottomed out about 13 months ago . . . fluctuated up and down a bit . . .and now are moving steadily up. At the rate things are changing, the average person/average loan amount is losing somewhere in the neighborhood of $5000-8000 worth of buying power every month or two.

The timing to own your own home has never been better.

2 votes Thank Flag Link Thu Jan 20, 2011
Dear SeekingAHome,

I will be short and sweet. I am sorry that you are hearing so many different stories. I just spoke with a loan officer and have good news for you. And this is very simple. First of all, his minimum requirement for specifically the credit score is only 600. While it is true that most lenders have a 640 minimum credit score requirement, he can go as low as 600.

Secondly, he told me that he would be more than happy to discuss all of your loan options with you if you would please give him a call. His office number is 763.754.4765 and his name is Tony.

I hope that helps. If you have any other questions feel free to contact me.

God bless you!

2 votes Thank Flag Link Wed Jan 12, 2011
While your credit makes it a challenge, with the large down payment and spouse's good rating as well as being first time home buyers, you should be able to accomplish this!
Contact a good lender whose well versed with first time home buyer plans. I,d suggest a mortgage broker as they're apt to have more options for you than a bank.
Once you know you options, seek an experience Realtor!
Jeff Jjasper
1 vote Thank Flag Link Wed Jan 12, 2011
Good Evening There are many factors & different types of purchase or delayed purchase options that could come into play on your quest. Your credit is under 640 I would say that it is going to be tough using standard channels & work history can also a point of contention... Cant use your spouses score & your income unfortunately. Formulate a plan of attack on your credit with either a credit repair firm or visit for some free tips. If you have down money, which you do, you could consider a contract for deed option or if funds are short a rent to own option... CD terms typically you pay a bit higher interest rate/maybe slight price concession & they are typically amortized over 30 years with a balloon payment. A lot of sellers out there looking for buyers which can make this option more available to you, on the flip side it does narrow down what you can look at considerably with REO & Short sales making up a large amount of inventory these days... There are also lots of assistance programs once you get that score up so now is a great time to work on getting those ducks in a row. Maybe someone else knows of a low score program? Hope this helps a bit & best wishes to you & your family I think you have picked a great way to start off the New Year!! You may contact me anytime & I of course would be happy to assist you in your quest any way I can. Regards, Mel
1 vote Thank Flag Link Wed Jan 12, 2011
Hello Dear Home buyer:
I have seen wells fargo giving 4.9 to 600 Middle score. Your down payment will not lower the rates, I would hold on to it, and not put more than 3.5%, but it is up to you. Your wife would not be on the loan, but because you are married would have interest in the property, like yours.
Wish you Best
Contact me, if you don't have an Agent yet
I will walk you to the bank....
Ramona, ReMax Results, Broker Associate,reMax results, MN,, 952-239-1697
0 votes Thank Flag Link Fri Jan 28, 2011
Seekingahome, there are some opportunities that are available as previously mentioned. A few of my previous clients have worked with a reputable organization to get their credit score cleaned up. In some cases as little as 30 days in other cases 4 months, then they are pre-approved. If that is not for you... There are still alternative financing options that are available such as Contract for Deed or Rent to Own type solutions.

Sounds like your getting your ducks in a row. Good Luck! Check out my reference for more information.
0 votes Thank Flag Link Wed Jan 26, 2011
There are a few options for you. Please feel free to call/email to discuss further.

Scott Hutchinson
Edina Realty
C: 612 396-0692
0 votes Thank Flag Link Sat Jan 22, 2011
The bad news is that we will consider the lowest credit score of all borrowers on the loan, and we can only consider income from borrowers in the transaction. So we could not use your income but your spouse’s credit score. Alternatively, 600 is not that bad and we are having a lot of luck working with borrowers to improve their scores through a “rapid rescore”.

Peter Boyle
Senior Mortgage Consultant
612 701 6816
0 votes Thank Flag Link Fri Jan 14, 2011
I would encourage you to speak with a banker to discuss your options as there may be a program you would qualify for. I have a few good recommendations for lenders for you if you are interested that can offer all types of financing and are all very good at what they do. If you are unable to qualify for a home loan at this time, there are homes available where the seller would consider financing your purchase as a contract for deed which would give you time to build credit or if your spouse becomes a wage earner you could then at that juncture obtain financing for the home and refinance the purchase into a standard mortgage loan. This would allow you to buy a home now rather than have to wait to be approved for financing if you are hoping to buy sooner than later. But first it does not hurt to speak with a banker as they may be able to pre-approve you now and if not can offer suggestions for credit repair/credit building etc. to help you obtain a loan in the future.

If you have questions about financing options vs. contract for deed purchases please don't hesitate to ask. I have extensive experience in the finance industry as well as experience with contract for deed purchases and can help answer questions or assist you in the process. Good luck with your endeavors and have fun looking for homes!

Broker Associate
0 votes Thank Flag Link Thu Jan 13, 2011
I would very much like to take a look at your scenario a bit closer. I do think we may have an FHA product available to you in the very near future. This may not be as much work as you think, and I would be more than happy to take this on at full steam. Please give me a call in my office at 651 592 6487


Benjamin B Bergen
Bell Mortgage A Division of State Bank and Trust
0 votes Thank Flag Link Thu Jan 13, 2011
It is fantastic that you have such a great down payment and your husband's credit score is so high. I would continue to work on paying off debt or clearing up your credit issues to raise your score to the minimum 640 needed to purchase. I know of several different lenders that offer a free credit analysis and can show you ways to clean up your credit to purchase within the next year or less. They also have contacts that work specifically with credit clean up services IF your credit issues are bad enough. Please let me know if you'd like their contact information, I am more than happy to refer them your way. Have a great day and good luck!

Hillary Slama
Metropolitan Home Team at Re/Max Results
0 votes Thank Flag Link Thu Jan 13, 2011
Hey, seekingahome!
Good for you for asking the right questions. This is a challenging time as the loan qualifying process has developed even narrower openings for potential home owners to obtain a mortgage. I think it's a great idea for you to talk to a qualified loan officer/mortgage broker with NO STRINGS ATTACHED! That way, you can just gather information to make an informed and thoughtful decision, rather than someone making you feel pressured to do something RIGHT NOW or you're going to lose it. Make sure you don't allow someone to make you feel "less than" because your financial situation isn't perfect right now.

Let me know if you need some suggestions of loan people to talk to who will treat you with respect and dignity.
0 votes Thank Flag Link Thu Jan 13, 2011
Although 600 is low, it is worth talking to a loan officer who has a focus on working with people who need to repair their credit before a purchase. You can begin the process of owning a home immediately by taking the appropriate first step. I would encourage you to contact a professional who can direct you further once your specific situation is understood a little better. Call me today and I will either set an appointment with you or direct you to the person who can get you started on home ownership as soon as possible!
Web Reference:
0 votes Thank Flag Link Thu Jan 13, 2011
I like Mark Claessens answer (thumbs up). Here's the thing though. You are only 20 points from the next tier of credit. Scores below 620 down to 580 are available but the rate is horrible and the underwriting is very strict. Increasing your score by 20 points gives you better rates, less money down (3.5% versus 5%) and less hassle. You can increase your score buy paying down balances to 25% of the credit limit on your cards. If you don't have any open credit cards, no one will be able to help you. You'll have to open up credit cards (either secured or unsecured) from places like Orchard Visa/Mastercard and let them age for a year.
Putting more money down does not work anymore. This worked back when we had sub-prime lending. Lenders are very strict now and the credit profile carries more weight than anything else. If you have any cards that haven't been used in a while, go buy something for $10 and re-activate it. DO NOT pay off any old collections as they WILL lower your score. Wait until after all 3 credit bureau scores are pulled before paying off or paying down collection accounts. Paying them now re-opens the account making the collection new. You can check out the link below for credit "repair". Ask for Gail Simmons
Web Reference:
0 votes Thank Flag Link Wed Jan 12, 2011
I agree with Mel Smith's answer. 600 is problemtic, but if you talk to a good lender they will be able to help you devise a plan to increase it to meet the minimums.
Web Reference:
0 votes Thank Flag Link Wed Jan 12, 2011
There are many options available for buyers in your position. I have had the opportunity to work with many buyers that have had credit issues in the past and where able to still purchase a home. I can’t comment on your specific situation without know more information. But what I can tell you is it is not very difficult to build your credit to an acceptable level to qualify for a conventional loan in today’s market. You are in a unique situation with having the down payment that you do. That is usually the difficult part the credit issue is much easier to resolve.
I would be happy to discuss your specific situation and provide you with options you have in your current situation. You would have the option to purchase a home now if you choose to use no conventional financing or you could choose to work on your credit for a couple of months and purchase a home using conventional financing. What you would need to do is explore both options and decide what is best for you. If you have any questions feel free to contact me.

Kurt Evans
Coldwell Banker Burnet
651 982-1705
0 votes Thank Flag Link Wed Jan 12, 2011
Give me a call or email me if you would like some free advice on raising your credit score and some tips on how to go about qualifying for a mortgage. It may also be worthwhile to look at a few homes to determine if the price of the homes you would like to live in fit into your budget and then determine if there are viable financing options to purchase one of these homes.
0 votes Thank Flag Link Wed Jan 12, 2011
Without your overall financial information--visit with any qualified loan officer(s), after reviewing your finances, credit--their scoring is oftentimes different--debt, etc., a determination on qualification can be made. If for whatever reason you don't yet qualify, your loan officer may offer great suggestions, as to what needs to be done in order to qualify in the very near future--then go from there.
0 votes Thank Flag Link Wed Jan 12, 2011
Have you talked to a Loan Officer yet? The down payment may help to overcome the credit score. I certianly know some good Loan Officers and some credit repair companies if necessary.

Otherwise, it is a buyer's market, and I have seen more and more sellers willing to look at contract for deed offers, especially with some good down payment. Then you can work on improving your credit to turn the contract for deed into a mortgage down the road.

Let me know if I can be of any help.


Brian Amiot
Sorenson Realty
Web Reference:
0 votes Thank Flag Link Wed Jan 12, 2011
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