Home Buying in Cary>Question Details

Clifton Davis, Home Buyer in 27511

Can someone with excellent rental payment history, but poor credit (low 500's), be able to obtain a home loan?

Asked by Clifton Davis, 27511 Tue Sep 16, 2008

My wife and I have pretty poor credit. My credit score is about 518. I don't know what my wife's is, but I'm sure its pretty bad too.

We have always rented and we have NEVER been late on the "essentials" (rent, power, etc.).

We have heard so many bad things about trying to obtain a home loan with bad credit, we are almost too scared to even try. We have 5 children, 2 out of the house (college), and have rented a townhouse for 20-some years.

I've heard of "owner financing" or "rent to own", but I don't really know how to go about finding these types of properties.

Also, we don't have money for a down payment. There is no way to really save money while trying to raise 3 kids and help get 2 others through college.

I am a salaried, retail manager and my wife provides home daycare, so we make pretty decent money, but not a whole lot.

Some advice/assistance would be most appreciated. Thanks in advance!

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I would recommend that you speak directly to a lender and can recommend one to you if you like. You will need to have your credit report pulled and then make sure that all of the entries are correct. You may need to contact the companies on the report directly to resolve any issues.

An associate of mine is also familiar with a company that will give loans with resonable rates for individuals with less than perfect credit if they can show that they have a steady job and that the bills have been paid on time since the last late payment (ideally a while back).

Please let me know if you are interested and I will obtain the information from my colleague.

K.C. McLaughlin
0 votes Thank Flag Link Sat Sep 27, 2008
You really need to get in touch with a local loan officer in your area. They can pull your credit an dtry to match you with what programs are out there. please avoid the internet lenders, you want someone you can meet face to face. The NC housing authority has some great programs as well, the best thing is that if you do not qualify now, they will be able to tell you what you need to do to get qualified. good luck Clifton.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Tue Sep 16, 2008
Clifton, there are programs available for no money down loans. The best programs, if you are not a veteran are USDA and you might also want to consider a NC Housing Finance Agency loan that can be combined with a second mortgage from the City of Raleigh. Both of these programs, however, require higher scores than you believe you have. But don't let that stop you!

I realize that you don't have much money - however, you should see if there are ways to pay the bills that are reporting to the credit bureau on time for 12 months. Usually, judgements that are not medical related will need to be paid, but that's something we'll know when we actually look at your credit. This 12 month history of on time credit should pull your scores up high enough for mortgage financing. Also, since I have a son in college, are you applying for Pell Grants? Maybe this will help take some of the pressure off of the family budget!

We offer free advice on a website we designed specifically for folks in your situation! Homeownership offers MANY benefits, and it is definately something you should work towards. The Tax Deductions are WONDERFUL!
0 votes Thank Flag Link Tue Sep 16, 2008
Hi Clifton,

The first thing I would do is speak with a lender and get your credit in order. This may take any where from 3 to 6 months or longer. The best interest rates are giving to those with good credit and history. With the tightening credit standards you have to demonstrate to prospective lenders that you'll be able to carry a mortgage payment. In short that means PITI (principle, interest, taxes and insurance ) in addition to maintenance issues that may arise. This may not be what you'd like to hear but that would be your starting point. If you have a good rental history that will help you as well.
I have a great lender that you can talk to:
Kevin Martini at 919-274-3700
He'll be able to guide you in the right direction.

Good luck!
Web Reference: http://www.LizeteSantos.com
0 votes Thank Flag Link Tue Sep 16, 2008
One point that you have rented a townhouse for 20 years means your rent may be below the market rent. In this case, staying at where you are may be the most cost effective way. Years later when your college kids gradutated and working, you may find the financial situation improved a lot!

Another quick way is to find someone with spare cash to team up with you. Years ago, USA Today had an article showing how tenant team up with investors. In general, tenants have no downpayment, where as investors do not want to deal with maintenance. So, tenant like you and investors like your relative with downpayment, may team up to go buy a nice house.

Then, you will pay the monthly mortgage payment and maitenace of the house and live there. Your investor partners, often has higher tax bracket, can deduct the mortgage payment and property tax. Years later when the property appreciated and you decided to move out, then you can sell the house and both cash in the appreciation...
0 votes Thank Flag Link Tue Sep 16, 2008
Hello Mr. Davis,

I would recommend contacting a good lender that can help you clear up any outstanding bills to
improve your credit score first. Once you have that completed, the lender could guide you to the
appropriate loan to best suit you and your needs. Let me know if I can be of any other assistance and best wishes with the home purchase.
0 votes Thank Flag Link Tue Sep 16, 2008
Hi Clifton,

Now is a great time to buy with so many choices out there and historically low interest rates at less than 6%. It may be a little difficult to get a home with scores under 620 due to the recent subprime lending fallout that has affected real estate markets nationwide. People with less desirable credit scores can have higher interest rates.

Also, it's important to keep in mind that you should keep personal and financial information confidential until you've entered into an agency agreement with a Realtor or a real estate agent. In NC, we represent the seller unless agency agreements have otherwise been reached (buyer's agency, dual agency, etc.), so anything that you disclose before you have an agent that represents your interests can be shared with the seller.

WIth that being said, I can put you in touch with some local lenders who may be able to provide you with a 6-12 month plan of action that will help increase your credit score to a more attractive level for obtaining a mortgage. When analyzing your financial history, lenders look at your debt to income ratio, credit score, tax forms, and paystubs to analyze the risk associated with giving a loan. An FHA loan is going to require about 3 1/2 % down, so that's about the minimum down payment these days. There are 100% financing programs available through the USDA Rural Housing loans, but you'd have to live in areas outside of the city and suburbs for it to be considered rural. Johnston Co, Lee, Harnett, Vance, Granville, Franklin, parts of Wake and Durham Co, and other areas fall into this category. Your Realtor or lender will have more info about this program. Here are some of the lenders I work with regularly who may be able to point you in the right direction to get your credit history cleared up: Dan Flynn with FM Lending dflynn@fmlending.com 919-785-4238; Sheri Rimel with Residential Community Mortgage/Wells Fargo sheri.rimel@residentialcommunitymortgage.com; Martin Bonis with Blackstone Mortgage martin@blackstone-mortgage.com; and Andy Borter with Primary Residential aborter@primeres.com. Just be sure to tell them that Wendy Norman with Fonville Morisey sent you and that you're looking for someone who can give you a plan to improve your credit score in hopes of being able to purchase a home.

Good luck...I hope that when you're ready to purchase a home that you'll consider me :) Have a great day (and try to stay dry)!

Wendy Norman, Fonville Morisey Realty wnorman@fmrealty.com
0 votes Thank Flag Link Tue Sep 16, 2008
I helped a young black colleague to buy a 2br 2ba condo years ago by referring her my Jewish realtor after I helped her to get a great job at Merrill Lynch paying $30,000 more. Then, this Jewish realtor came back to me, saying she never seen such bad credit buyer. So, I asked the realtor why? and how to remedy the credit in order to buy. Then, I heard this ex colleague paid back all the rent she owe the company, and later paid off all the pse&g, and credit card, ...etc.

It has been several times, almost able to close this 2br 2ba condo now worth $250,000, then she paid only $90,000. my ex colleague almost gave up while staying at motel, moving out of 1br condo rented from my other friend, thinking the 2br condo can be closed. NO!!! So, the colleague continue patching the credit by paying back all the outstanding debt that impact the credit.

Guess what? Eventually, all the debts paid and all clean up then. My Jewish realtor told me, now my ex colleague got EXCELLIENT credit, and close and move to the condo, and of course, after dozen years, you know how much my ex colleague make.

So, I would suggest that you run a personal credit check to find out what outstanding debt that you should pay. You may proactively pay those debts and get those records clear up, soon or later, when all those impact your credit scores removed and cleared. You shall have a perfect score.

Buying a house is like buying a car. You either have money to buy, or you need to have someone willing to loan you money such as bank, and that implies you need to have good credit. Would you loan someone $100,000 knowing who may default and walk away?

Anyway, there still be people willing to do owner financing or rent to own, why? because the property may be "vacant". e.g. I advised homeless families in Williamsburg VA area to find for sale mobile homes. Why? since the town is tourist town, and many wealth people, after years, decide to get rid of mobile homes that they may not use for vacation for years and still need to pay loan and maintenance fee, tax, ...etc.

So, why let it vacant? So, the homeless family can move right in, and start paying some rent, and some assume the loan and paying the loan and maintenance fee and tax. So, it is a win win situation. None of homeless families will pay trick NOT to pay rent or loan payment, or they may be evicted. Besides, the payment would be much lower than stuck in motels. Also, save lots of meal cost with kitchen. For the seller, what they can lose is nothing since the unit were vacant anyway. now someone else going to pay for it.

So, in your case, you may find "vacant houses" in your area, especially from "senior owners" who may be already moved to condo or assisted living, and as long as it is vacant, your moving in can produce huge gain for them or for their children.

Since you claim you have NO downpayment, in this case "owner financing" is NOT working, no one I heard may finance 100% to someone with bad credit score.

This is like walk to car dealer and telling them I have no downpayment, and I have bad credit, but I still want to buy a car from them. The best case I can think of is if I walk to buy an gas hogging SUV from desperated dealer, maybe they will let me have the SUV, hoping I will pay them on time.
0 votes Thank Flag Link Tue Sep 16, 2008
Hi Clifton
It is best to improve your credit score if possible as getting a home loan with a score below 600 is becoming almost impossible now days. I would reccomend talking to a lender and they can tell you what to do to improve that score. If you are going to be looking for a home in the Triangle area I would be happy to let you speak to our in house lender, who will offer his advise at no cost to you.
Thanks Michael
Web Reference: http://www.colvinm.hpw.com
0 votes Thank Flag Link Tue Sep 16, 2008
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