Financing in Sacramento>Question Details

Mmillsaps, Home Buyer in Carmichael, CA

My husband and I have poor credit scores of 554 and 564. We had too much debt and we juggled it around until

Asked by Mmillsaps, Carmichael, CA Tue Jul 22, 2008

we could get a handle on it. We are now seeing the light at the end of the tunnel and have paid off all but one $7000 credit card at 15% and a car loan at $16,000. We have paid off over $50-60 already. We collectively make 90,000 to 100,000 per year and I am a teacher in a Title 1 school. We would also be first time home buyers. What luck will we have with getting a loan and down payment assistance? We are a bit embarrassed at our low credit scores so we want some advise before we go lay it on the line and it gets personal...

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Wow! It is great to pay down your debt. It is a huge relief. I would try to clean up your credit. See if some of the items that are bringing down your credit score can be corrected. With a copy of your credit report, dispute items online. I had great success raising my score by filing disputes. It is time consuming and and can be frustrating, but if you keep at it, negative items can come off. Try it, you have nothing to lose. There are also homes right now where owners who are trying to sell are willing to carry back loans. Maybe that might be an option for you. Speaking to a loan office will help you because then can give you options and help you get on a plan. Let me know if you need a referral of a local broker. Good Luck!
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1 vote Thank Flag Link Tue Jul 22, 2008
Well...First I will start by saying congrats for paying off so much debt! It is easy to accumulate debt, and not so easy to pay it off.

Honestly - what is your rush to purchase a home right now? I think you will be well served right now by continuing to pay off your debt and generate a good history of making payments on time. Focus on that and improving your credit scores. You will be hard pressed to find a loan with favorable interest rates with your current credit scores. You will likely be penalized with higher mortgage insurance payments as well.

Also - it is very likely that downpayment assistance programs will be eliminated by some pending legislation...the bill should be passed in the next week or so and put on President Bush's desk for approval shortly thereafter. I blogged about this topic this morning... here is a link -…

I suggest focusing on paying off your debt, raising your credit scores, and saving up your downpayment. Sorry if that is not what you were hoping to hear. Good luck to you.

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1 vote Thank Flag Link Tue Jul 22, 2008
Erin Stumpf, Real Estate Pro in Sacramento, CA
Low credit scores are nothing to be ashamed of. We have all had problems in life. Credit reports can be restored and your credit scores raised. Take a look at the short video in the web reference and send me an email after you do. You can get the home you want at a good interest rate.
0 votes Thank Flag Link Sat Aug 16, 2008
You may want to look at doing a debt arbitration program. You can save up to 60% of what you owe. Are you current on everything?
0 votes Thank Flag Link Sat Aug 16, 2008
good afternoon.i have done low risk, high risk, and tough mortgage financing for almsot 14 years.i look at all situations....please call me to talk...weekends are okay.bob mcclure- mortgage now- farmington, michigan...i am licensed in california. (248) 806-0366.....
0 votes Thank Flag Link Sat Jul 26, 2008
Don’t be embarrassed about the score! You are proactively fixing it as we speak!

Have you had your credit pulled since you have paid off the debt? I would be curious why your scores are where they are at!

If you want we can run your credit and run it thorough our online system that will show us exactly what changes you can make to get your credit score up. We have many clients we have assisted this way, so you are not alone!

Without looking fully at your situation, it seems to me .. for the most part have little debt to pay off. With your annual salary and the right purchase price, you could still continue to pay off debt and own a home. I am sure with your high income you are paying through the nose for taxes every year. If you had a write-off (I am assuming that you are not self employed), you could divert more money to paying down your debt.

The biggest thing you can do for yourself is have a plan! Make sure to work with a Realtor and Mortgage professional that can help!
0 votes Thank Flag Link Thu Jul 24, 2008
You may be able to get an fha loan. You really need to speak with a lender and get prequalified. Here is some info for first time home buyers.…
0 votes Thank Flag Link Wed Jul 23, 2008
Work on getting your credit up a little. As others have said, seller funded down payment assistance programs are likely to be banned this week. But your income limits are very close for down payment assistance through CAL HFA. They have a program called CHAP that will lend you 2% of the 3% required. National Home Buyers fund also has a down payment program. They have very limited funds, and I believe they are out at the moment. They can offer a non repayable 4% grant for down payment, that is no seller funded. From time to time the City of Lincoln offers a down payment program, so does the city of Sacramento.
0 votes Thank Flag Link Wed Jul 23, 2008
Good effort so far! I don't think it's too early to begin a plan for buying a home, either now, or for in the next year. The key is to have a written plan as to how to complete financial management. In addition, I would suggest you begin to learn about home values and markets that you would be interested in. You can do that by getting on a client portal and watching pricing, and market activity. It will also help you to determine what you want the home to be like.

Buying a home is not a trivial thing to do and 3-6 months is not unreasonable to consider preparing for buying a home.

Yes, the home buyer assistance programs have been discussed as going away, as others have mentioned. But there's also been new discussions on other homebuyer programs being established. I don't think any of those 'potential situations' are reasons not to have a plan in place now to meet your objectives. In addition, you have time to get your credit card balances under 30% of the credit limit and possibly create some liquid accounts as well. (Lenders will consider other funds and your question did not list all the other items a lender might consider)

I believe you might qualify for a home now, despite what others are saying. I would just recommend that it be done with sound decisions to move towards a final goal of balanced financial management, such as beginning a practice of paying off credit cards, paying all debt on time (no lates) each month, and living within your means with not only a budget, but an investment plan (INCLUDING a house).

I have an article that I published on plans to take to improve your credit score. I also give my clients a book that is the 'bible' for financial management. If you'd like a copy of either, just ask. Most important is that, in your whole plan for taking advantage of this great market to buy a home, that it be financially sound into the future, and not repeat the mistakes of so many that are in a mess financially.

I applaud you, I really do!
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0 votes Thank Flag Link Wed Jul 23, 2008
Effective July 14, FHA has assigned risk-based premiums that is based on the borrower's FICO score. So, you will pay a bit more but you should be able to get a FHA loan. I work with an excellent mortgage broker who specializes in FHA loans, should you want to pursue that avenue.

For example, scores range from 850-680, 679-640, 639-600, 599-560, 559-500 and 499-300. If you receive HUD approved counseling, as a first-time home buyer, you basis points may cost you only 200 for upfront mortgage insurance premiums. But you really need to speak to an excellent mortgage broker, and loans are not my specialty as I specialize in real estate.

Also, bear in mind that the FICO scores you can get and those obtained by a mortgage broker will be different from each other.

As for the down payment assistance programs, you'll have to hurry, because it's highly likely that President Bush is going to sign legislation very soon that will eliminate those programs.

I would suggest you contact Evelyne Jamet at Vitek Mortgage: 916.452.8800. She can prequalify you over the phone. If your FICOs are higher than you suspect, she may have other options to present to you.
0 votes Thank Flag Link Wed Jul 23, 2008
I work for a mortgage bank and I see your situation all the time. I think your main focus should be whether down payment assistance programs will continue. When the President signs the housing bill, it should do away with DPA programs but the question will be when do they go into effect. Assuming that you can get a 3% down payment (it can be a gift from family still) then the next question will be "How do you get approved?"

Let me tell you that due to the influx of FHA files in the last year, many banks have established a minimum credit score requirement for FHA loans. This is not an FHA requirement but a bank-by-bank policy. Most banks raised the number to 580 or more. Which means right off the bat, you have a slim number of banks to even apply for an FHA loan at. I work for Flagstar Bank and because we have always had a strong portfolio of FHA files, we still do not have a credit score requirement for FHA files, meaning that your application has a home with us. After that, when taking the application, the main thing would be to get some letters of explanation as to your lates, collections, etc on your credit. If there are good compensating factors and you can possibly provide a 12 month payment history for "alternative" credit items like rent checks, utilities, auto ins, cell phones, etc. then you have shorn up your file and made you look stronger than another similar applicant who produced no such documentation.
I know that most standard advice will be to simply continue on the path of building up your credit, which is very good and very true. However, you simply never know if you could get approved right now and if you could, what's the harm?
I can't make you any promises but I would welcome the chance to speak to you, review your situation and give you the tools you need plus the knowledge of what an underwriter is looking for when they get you application. You can call me anytime today and I promise you no gimmicks, sales pitches, mandatory credit pulls, etc.
Luke Allison
Flagstar Bank
0 votes Thank Flag Link Wed Jul 23, 2008
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