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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It's likely not going to happen. You may be in luck in a few months though. Everything you do to your credit should take 30 days or so to report. Some things like debt ratio can boost your credit score significantly. You need to pay down debt. Do NOT close any accounts, even if you're not using them. Don't buy a car or apply for any new credit lines. Keep paying off debt. Make all payments on time. Never be late. If there are lines of credit, revolving accounts like a department store, etc. and you have a $0 balance on them. Buy something every few months or so and then pay it off immediately. This will also help boost your credit score.
In the meantime, save all you can. Save for your debt pay-off and also for your down payment. You can also possibly look to someone in your family to co-sign or buy a home for you and you can buy it back in a year or so. It's a possibility.
If you'd like to discuss this further, feel free to contact me anytime.
RE/MAX NE Ohio
It might help to look at your credit and find out why your score is the way it is. I had a gentleman call who said the local bank turned him down for having a 600 score; I structured the loan accordingly just for conversation purposes. However, when I pulled it his report, his mid was actually 660. So, it depends a lot on who you are working with and whether they are pulling only one score or if they pull all three. I have another guy who while yes I helped get something off his credit, his scores after an adjustment are 590, 660 690. So it might be worth a phone call back to who told you your credit scores. Find out if they pulled all three. If they've denied you credit you have a right to a free copy of your report any way..
With a 580 credit score, if that is your mid score, it's really tough to get them done. It's not that we don't want to do them. Actually my company can BUT the problem is that with that low of score we couldn't write it and close your loan in house, we'd have to broker it out. That said it makes it more difficult to fall under Section 32. Section 32 is otherwise "high cost loans". Congress put in place thresholds that we have to meet. They've regulated us lenders however they didn't take in to account all of the third party fees that are out of our control. Many of those fees are the same as if you finance 300k or 50k. However, if you take a percentage of the loan size you can fit a lot more fees into a 300k loan versus 50k loan. I know you were looking for help versus the why it's difficult for you to find the help.
Take a hard look at your credit. If you have add'l questions, I'd be happy to help.
Ohio Licensed Mortgage Loan Originator
Contact and licensing information can be found on my profile.