TDodd75, Home Buyer in Alexander City, AL

Home Financing Options?

Asked by TDodd75, Alexander City, AL Thu Jan 17, 2013

My husband and I are looking to purchase a house. The house is appraised at 48,000 that the owners have just reduced the price to $25,000. Problem A seems to be that no one likes financing homes in this price range. Problem B is that our credit is quite bad (around 540). Do we have any hope of finding a lender willing to work with us? We have a down payment of 20% .

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Your best bet would be get with a GOOD lender. One that will tell you exactly what you need to do to bring that score up quickly. Not sure where Alexander City is, but if you are in the north part of the State, I can connect you with a few helpful lenders. More than likely, you will be able to get a personal loan for the 25K purchase.. That's what a good lender can help you with too. OR...possibly a Credit Union in your area could help.
0 votes Thank Flag Link Thu Jan 17, 2013
I would not expect you to be able to find financing due to either of those reasons. All mortgages must pass the various Federal and State fee compliance tests for predatory lending. Generally, loan amounts under the lower $30K's will not pass those required tests.

For an FHA mortgage, most lenders require a 640+ credit score for the last 2-3 years now. You are currently 100 point below that normal minium.

Prospect Mortgage is one of the few direct lenders to offer an FHA 580-639 FICO loan program. Credit profile is a major factor in a mortgage approval. Generally, there should be no late payments, new collections accounts/charge-offs/liens/judgments in the last 12 months. It is required that all open collection accounts must be paid in full if their cumulative balances exceed $1,000.

The 3.5% down payment can be from the borrowers own funds or it can be gifted from a family member. Two months of reserves for the PITI (Principal + Interest + Taxes + Insurance) payment + HOA Dues will be required. This must be from the borrower’s own funds and not a gift.
You would need to contact each of your creditors directly to see what your options are. Paying off derogatory debt will help improve your credit score in the long run, but not immediately.

Working on your credit is your best action plan right now. With collection accounts, most of the damage is done when they are initially placed on your credit report. Some collection companies are now reporting you are late each month the debt goes unpaid. This continues to drag on many people’s credit scores each month until the debt is paid in full. Until you do that, your credit score has little chance of improving.

In exchange for paying the collection account in full, you can try to negotiate to have them completely remove the derogatory item once the payment is received. Some collection agencies will do this, while others will not. You will just have to ask each one and see. If they will not remove it, just having it paid and closed will help in the long run.

To build positive credit, you typically need to have 2-3 trade lines reporting for 12-24 months. There should be no late payments or other derogatory items reported in the last 12-24 months. On your Revolving credit accounts, your outstanding balance on your monthly statement should not exceed 30% of the credit limit.

Regards,
Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
rodney.mason@prospectmtg.com
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of lending experience.

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing.
0 votes Thank Flag Link Thu Jan 17, 2013
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