Foreclosure in Chicago>Question Details

N_boswell78, Home Buyer in Chicago, IL

Bad credit in Illinois with down payment

Asked by N_boswell78, Chicago, IL Sun Jul 28, 2013

I have a credit score of 550 and I would like to buy a $35, 000 bank owned home and put 20% down or more is it at all possible for me to get a loan or should I just make a lower offer?? I know the loan amount is low but I would not like to take all my savings out to buy...

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Trevor Curran’s answer
Good afternoon,

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.…

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140

*If you thought my answer was helpful, please give me a “Thumbs Up” or “Best Answer.” Thanks!
0 votes Thank Flag Link Tue Jul 30, 2013
A) The loan amount, $35k, is not warrantable by a bank, at least none I'm aware of. Most banks won't lend for less than $50k, for obvious money for them to make a low loan amount.

B) Credit score minimum is normally 640. Work with a lender to determine an action plan to improve your credit score.

C) Cash is your best bet or wait until you improve your score then seek to purchase with a loan over $50k.

D) Do not low ball on a property that is already at a low ball #. You will have competition. CASH investors are ACTIVELY seeking investment opportunities and have the cash to back up their offers.

Good luck!
1 vote Thank Flag Link Mon Jul 29, 2013
Great details.
Flag Mon Jul 29, 2013
Dear Home Buyer,

Most lending institution will not originate a home loan for under 50,000. The practice is consider predatory lending and it cost a lending institution way to much money to originate the loan.

If you belong to a credit union or something you may have a better chance.

Best of luck.
1 vote Thank Flag Link Mon Jul 29, 2013
Great responses below. Trulia receives similar posts from hundreds of folks daily from all cities who want to purchase/finance real estate with low credit scores. The bottom line is until you address the core issues that plague your credit score real estate investment opportunities will be scarce.

Lots of folks with low credit scores are working on improving their scores through credit counseling and some will enter the real estate market later this year well prepared to purchase. Credit counseling is more than just assistance to improve credit scores, it is in many ways a path to financial awareness. Good luck and I wish you all the best.
0 votes Thank Flag Link Thu Aug 1, 2013
If you plan on obtaining a loan you need to improve your credit scores. 550 is simply too low. Keep on working, save your money and either try to buy a home for cash or qualify in the future for a loan.
Web Reference:
0 votes Thank Flag Link Mon Jul 29, 2013
I understand...there are other offers now as I will probably have to up my offer anyway...
0 votes Thank Flag Link Mon Jul 29, 2013
...and submit proof of funds or loan approval. Keep saving and work on improving your credit.
Flag Mon Jul 29, 2013
So far there have been 8 responses and all of them are from realtors. The loan amount is so low that the loan officers are not even responding to your question.
Nick Radakovich Home Sales Realty
0 votes Thank Flag Link Mon Jul 29, 2013
that is a very small loan amount so prepare to do some searching
0 votes Thank Flag Link Mon Jul 29, 2013
Check and see if your bank will make such a loan. I think you may have a problem at that price point
0 votes Thank Flag Link Mon Jul 29, 2013
Seems like you will need to make a cash offer with the combination you detailed.

Good luck!
0 votes Thank Flag Link Sun Jul 28, 2013
A 550 credit score, a low purchase price and a bank owned property (I assume it needs work); that is a tough combination to get a loan. You will hear from loan officers on this website, but I would suggest you think about a cash offer.
Nick Radakovich Home Sales Realty
0 votes Thank Flag Link Sun Jul 28, 2013
You should speak with a lender about getting a loan. With 550 though it seems unlikely.
0 votes Thank Flag Link Sun Jul 28, 2013
No matter what the financing you do, you always use an agent to negotiate the lowest price possible. So YES, make a low but reasonable offer. Too low of an offer that does not relate to the actual market will offend the seller and prevent them from making a counteroffer.

In the meantime, work on your credit score. Get a prepaid card and develop good credit and dispute all the negatives with all 3 bureaus. If the creditor does not confirm it within 30 days, it comes off.
0 votes Thank Flag Link Sun Jul 28, 2013
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