That being said; I have found that medical debt and collections wreak havoc on credit scores. Almost all of the clients I work with that have credit scores under 600 have unpaid medical debt and this can be overcome. The most important factor is the reason for the credit score and not the score itself. FHA allows down to 500 with 10% down so it's possible. You need a thorough review of your credit report by someone who knows what will be a deal killer and what will be allowed. Not all derogatory credit information is treated the same and the agents here telling you that you cannot purchase without a shred of information from you other than a score, are irresponsible and operating outside their scope.
A good loan officer will first work with you to get your score as high as possible. If after that you still fall in the 500 range, there may be options. Don't let people stop you from at least trying. Information is free.
Look, if you want to throw your money away, just put it in an envelope and send it to me. You won't get anything in return. But this whole "renting is just throwing your money away" is a line used by some real estate agents to inject a false sense of urgency into buying.
You're not throwing your money away by renting. You're getting something very valuable in return: A place to live.
OK. The argument is that all you have at the end of the year are rent receipts. You have no equity. That's true. So you want to buy. Let's say you find a place for $200,000. You qualify for an FHA mortgage at 3.5% down. You get the seller to pay all closing costs. Sweet, right? So you're now out of pocket for your $7,000 down payment. Considering that the costs to sell are roughly 10% of the value of the property, if you tried to sell right away, you're at least 6% underwater. You'd have to bring at least $12,000 to closing.
But let's fast-forward a year. What's happened to real estate prices? If they're down, you're even in a deeper hole. A drop of 5% means you've lost $10,000. If prices stay flat, you're still $12,000 upside down. If they've gone up 5%, you're STILL upside down.
Meanwhile, compare the costs of ownership versus renting. In some parts of the country, it's cheaper to own than to rent. But in most areas, it's cheaper to rent than to own. Work the numbers where you are.
Then there's the issue of mobility. If you rent, you can move without penalty when your lease is up. So every year, you can decide whether or not to move or to stay. It's not so easy if you own.
If you have the "dream of home ownership," then it's OK to pursue it. But don't confuse dreams with reality. The reality is that you're not throwing money away on rent.
Hope that helps.
As the score being an accurate picture of how you pay your bills is an outdated model. The credit scoring model is designed to favor banks period.
Let's give an all too common example. Suppose when the economy crashed a few years ago you were laid off and were out of work for 4-5 months. You started having late payments, not behind just late payments. Then back to work and your are all caught for the last two years. You are still dragging the late payments and they can hold your score down.
According to the scoring model those late payments are there for 7 years or til you get them removed.
Everything can be removed
HERE ARE A FEW OPTIONS
With a 560 you can get a loan up to 96.5% of the homes value. If you cannot come up with the 3.5% down payment there are a few down payment assistance programs that are available in the Contra Costa County Bay Area deeding on your income.
There are also several Portfolio or Private money options that might fit you depending on exactly what is going on with your credit.
You may be best served working on repairing your credit though... do you know what is effecting your scores?
It may be possible to remedy your credit issue and do a "Rapid Re-score" to increase your credtt and get you the best loans available.
Rapid re scores are not very expensive and if it would be helpful we can show you specific things that you can do in order to get the scores that you need.
I hope this helps.
1. Nope...can't buy. I'm a Broker in the Memphis area...bad credit and bankruptcy capital od the U.S. Our minimum score for an FHA loan is 620 with 3.5 percent down. You need to get a lender to work with you on credit counciling and do what he/she says to bring your score up to their minimum FHA score.
2. Yep...you can rent...probably not from a corporate situation like an apartment community or management company...but some private owners might be likely to let you rent fom them. Be honest on your application and about your credit. If you have good references from renting before..that is helpful. If you have ever been evicted or have judgements, then you have an uphill battle. But, If you present yourself professionally and respectfully, you have a better shot.
Renting is not a bad plan in this environment. Rates aren't going up anytime soon and there is plenty of inventory...so take your time. The worst mistake you can make is get in a hurry or for goodness sakes, put yourself in some dead-end lease purchase situation.
Get a good realtor that want to make you a buyer in 9 months to a year. Helps you find that great mortgage broker and hopefully, checks-in on your progress. This is YOUR future...so take is seriously.
If you need help, reference my website on credit restoration. My guy is the one I go to to help people that need to raise their score if they wish to purchase.
I am sure you can still get approved for a loan. You may pay a higher rate in the beginning. You need to find a lender that can assist you. I have some excellent lenders hat I can recommend if you are still considering buying. I specialize in negotiating with Short Sales and REO and normal properties and can help you with the purchase side or selling of a home if you needed. Between the lenders that I recommend and myself, we could help you buy your home. You need a Realtor and Lender that is going to go above and beyond to get you in that first time home and you will happy for it in the end.
When you are ready to get to that next level, call me and I can help you with all your home purchase needs.
Better Homes and Garden Previosly Prudential California Realty
BUT To assume that is the case is well....
The recent economic conditions have destroyed the validity of the current scoring model.
Buying more than can afford is not very smart. But neither was lending the money without income verification.
I have learned a lot about credit over the last couple of years. One thing I can tell you it is a rigged game. I realize if you don't pay it has an effect.
But why aren't monthly utilities, rent, cell phones, gym memberships being credited as a positive trade lines? Oh that's right if you don't pay they are reported. Because it is in the best interest of banks and insurance companies to keep your score lower.
I think if you are not going to count the positive you cannot count the negative of the same item, seems fair to me.
Remember Everything cost more when your score is lower. Hmmm!
Credit reporting is a business controlled by banks. BUT the laws favor the consumer.
So if you want to leverage your rights under the law and force the agencies to follow the law with your credit profile get a hold of me. 801-999-8209
A credit score of 560 indicates a problem with how you pay your bills. An underwriter looks for a willingness to pay. Go to your local nonprofit housing group for credit counseling. The counselor will go over your credit report with you and tell you what you are doing wrong. Listen to them and follow their advise. When your score is 640+ you can think of buying a home.