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.
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You could also subscribe to one of the credit reporting agencies and monitor your credit monthly (to make sure it's accurate). They also have tools that will show you if you do X then your credit will raise by X points. By keeping an eye on your own credit you can not only correct any mistakes but possibly catch fraud or identity theft before it's too late.
Also, your credit may not be as bad as you think it is. There are plenty of lenders who will take a look, make recommendations and then find programs or wait for a program to come along that will work for you. Local lenders are best since there are programs for Hawaii residents that only local lenders have access to and these are great for first-time buyers (they help with money down assistance). If you would like the name and number of a good local lender or two please let me know.
A House-SOLD Name!
Lenders have a variety of programs available to buyers based on credit scores, employment and cash reserves.
If you would like a few recommendations, let me know. I always recommend talking to at least 2, if not 3 lenders.
You got some very sound advice from Linda & Don.
I just want to add that in addition to a "good credit" you should also have a steady job & some cash set aside for down payment & closing costs. The 100-105% financing is a thing of the past!
Please let me know if you would like get in touch with a mortgage broker that could see whether you qualify as a home buyer!
You can email me at MoniqueHawaiiRealtor@gmail.com or call me at (808)292-6327.
Don gives you excellent advice. If you have the dream to own a home, YOU WILL. Many people today have not so great credit and I won't go into all of the details of why I believe that happened. I do encourage you to talk to friends, family, co-workers, etc...........people you trust and have respect for that have already been through this.
Don is so on the mark when he states that it could be 6 months to two years, but don't give up. The key is to find a loan officer that is patient and knowledgeable and willing to work with you to repair your credit. I have seen this accomplished in a very short term depending on the debt origination.
When you do get those scores up to where they need to be and you begin the search for your home, the things you need to look at are big ticket items. In Wisconsin, that would be roof, furnace, central air and foundation. In Hawaii, I'm sure those items would be different.
Shop around and ask lots of questions. Find a good agent and commit to them and they will work hard for you.
I wish you good fortune in your search. Come back and let us know how you're doing from time to time. We do look for you and how things worked out and we love to hear about the success stories.
Work on cleaning up your credit. Many of the responses here will be along the lines of: "Check with a mortgage broker. Your credit may or may not be that bad. You need to find out for sure."
And that's OK advice. But you're probably a pretty good judge of your current credit. Then take that next step and work on improving it. Bad credit doesn't last forever. You say you do want to buy a home some day. Depending on how bad your credit is, and how much you can do to fix it, the day you can buy a house might be in the range of 6 months to 2 years away.
Hope that helps.