i have a credit score of 535 do you think there is any possibilty of me getting a loan to buy a house

Asked by Fire976, Fort Mill, SC Wed Jan 6, 2010

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William Pola…, Mortgage Broker Or Lender, Suwanee, GA
Thu Jan 7, 2010
Dan, I like your thinking, but unfortunately, that train of thought doesn't pay the bills for people in this industry. We make sure that the loans are not going to default to the best of our abilities prior to closing. We have to buy the loan back if the person does default, so it's in our best interest to make sure the person qualifies. A score of 535 doesn't necessarily mean the person doesn't have any money. It could mean that a person never got around to rebuilding the credit. It could mean that the creditor didn't update the bureaus to reflect a paid off account. It could mean that the person has one credit card that is reporting late because the payment got stuck in the mail system and the other accounts are old medical collections that DON'T need to be paid to buy a house. It could mean a lot of things, but it doesn't mean the person has no money. If Fire976 pays off any collections prior to going to a lender, he/she will forfeit any chance of buying a house. You really have to know what you're doing when paying off accounts. It's very tricky. I can appreciate your comments because I used to think that way too. But I found out that if I do my job well and counsel the client to my best ability, then why not let the person own a home?
1 vote
Gregory Cook, Mortgage Broker Or Lender, Temecula, CA
Wed Feb 24, 2010
Fire,since you initially posted there have been some changes to FHA guidelines that affect your situation. FHA still doesn't have a minimum credit score requirement but almost every lender has a minimum of 620 (some 640).
FHA now requires if you have a credit score below 580 your minimum down payment is 10%
Work on your credit, and shoot for at least 620 and getting your first home will be much simpler.
Good Luck!
Web Reference:  http://firsttimehome.us
0 votes
Ron Rovtar, Agent, Boulder, CO
Wed Feb 24, 2010
Hi Fire976:

Probably the most important thing you can do right now is to repair you credit score. You should talk to a mortgage broker about how to do this. However, the blog entry referenced below should help you get started. Knowing a bit about how your score is computed can make repairing it much easier.

Kind Regards,
Ron Rovtar
Prudential Real Estate of the Rockies
Boulder, CO
0 votes
..., , Lexington, MA
Wed Feb 24, 2010
While there are some FHA programs for 580 FICOs, most don't go below that. What's left are lenders who would require a substantial down payment.

The score isn't the whole story. Even people with much higher scores can have trouble if their credit history has certain items. Conversely, lower credit scores aren't always that bad and some types of collections (for example, medical) might not have to be paid off. Lenders look at the whole credit record and not just the score. If you fell on hard times there are ways to improve your credit score. Keep in mind that lenders would be looking for a pattern of willingness and ability to pay with the understanding that we all have temporary setbacks now and then.

Speaking to a credit expert might help. I would suggest that you avoid debt consolidation or credit counseling services that offer to reduce or combine your debt. Any mortgage profressional or credit bureau would have access to simple credit services to help you get started by evaluating what needs to get done to improve your score. Try http://www.MyFico.com or http://www.mymoney.gov for more information.

In any case, you may be looking at a longer-term goal and not purchasing right away.

I hope this helps. Let me know if you have questions.
0 votes
Kurt Thomas, , 81501
Thu Jan 7, 2010
I suggest meeting with a lender that commits to spending time with you explaining your options and putting a plan together WITH you to either pay or not pay certian items. FICO scores are confusing to many many people, if your told they no it all the probably dont know much. The best thing you could do is wait to buy that home, work with a pro on your credit and stay up on everything coming in now.
Within a year or two you will have followed a good plan (hopefully) and also saved some money/assetts.
It really takes an education process to work on your score, I rarely see people who can just work around a low fico and get a mortgage.
Your better off finding a patient, informed lender that will help you out over the next year or so, and be sure to use them when you do buy the house!
Good Luck
Web Reference:  http://www.owngj.com
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Dan Chase, Home Buyer, Texas City, TX
Thu Jan 7, 2010
That credit score is not good at all. Find a lender or non-profit counseling service to help you get the number up. Even if you could get a loan now the interest rate would kill you.

Do you have a down payment for the house? Can you cover closing costs?

When the furnace dies how would you pay for its replacement?

your credit score does not really matter. If the rest of your answers are no, you are not yet ready to buy a house. Pay off your debt, save your money, improve your credit score, then when things are in palce you will be able to buy a house and keep it. Now, you might buy it, but could you keep it if anything went wrong financially?
0 votes
William Pola…, Mortgage Broker Or Lender, Suwanee, GA
Thu Jan 7, 2010
If you don't have any open collections, find a broker who can sign up with First Guarantee Mortgage (wholesale lending). They work with scores to 530 (middle score). Minimum down payment is 3.5%. Rate is in the 6-7% range. I'll tell you though, they don't approve very many of these loans. The next tier to shoot for is 580 middle score and find a broker working with First American Mortgage. Rates are about a quarter to half percent more than today's rates. The best tier is 620.
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Gregory Cook, Mortgage Broker Or Lender, Temecula, CA
Thu Jan 7, 2010
Fire, having a 535 credit score is not a death sentence, but you will have to commit to taking the necessary steps to fix the problem. When lenders evaluate your credit, it's more than the score (there are minimum scores depending on program) but also how you go there. Have your credit reviewed, get on a plan to fix the problems and then you can start the homebuying process.
There is a link on my website for a Free Credit Evaluation.
Web Reference:  http://firsttimehome.us
0 votes
Brian Burke, Agent, Highlands Ranch, CO
Thu Jan 7, 2010
No, The new Min. for FHA is 640. You need to repair you credit first. Then you need to have about 3.5% for a down payment on a FHA loan unless you do the $100. down on a HUD HOME.
0 votes
Hannah Flieg…, Agent, Larkspur, CA
Thu Jan 7, 2010
If you are able to obtain any type of loan at all you will pay dearly for it because of your poor credit rating. Why not begin with the basics and get a better understanding of credit and it's uses? This way you can participate in the American Dream and actually maintain it as well.

Good Luck!

Hannah Fliegel
The Credit Restoration Expert
0 votes
Bill Eckler, Agent, Venice, FL
Thu Jan 7, 2010

Your time would be well spent doing what you can to repair your credit rating....unfortunately, your credit score may be a little too low to qualify for a loan.

As previously mentioned, you may want to consider seeking a "lease option" agreement that would point you in the direction of ownership without qualifying for financing.

Best wishes,
The Eckler Team
0 votes
Robert McGui…, Agent, Denver, CO
Wed Jan 6, 2010

The score 535 is a little low for most lenders even if you are going FHA. They want you to be at 600-620 for normal loan situations. There are some programs such as the US Bank American Dream that have gone as low as 580. I am not a big fan of lease-option. There are too many negatives, downsides and ripoff scenarios that make it less than desirable. My suggestion is to speak with a lender who knows how to work with you to raise your credit score. In some cases I have seen buyers put plans in place that raise their scores considerably in 6 months time or less.
Feel free to call my lender Lonnie Glessner - (303-993-2367) to put a program in place to improve your credit scores. The better your scores, the better loan you can get and the more home you can purchase.

Robert McGuire, ASR
Your Castle Real Estate
0 votes
Dp2, , Virginia
Wed Jan 6, 2010
Although you probably won't qualify for conventional financing, you might be able to buy a house with a lease-option.
0 votes
Middleton And…, Agent, La Jolla, CA
Wed Jan 6, 2010
Hi Fire,
You need to be careful with lease options, as if the market is still going down in your area you never know what the price will be in a few years.

Your best bet is talk to a financial advisor and try to fix your credit soon so that you can take advantage of the low interest rates. Credit repair companies sometimes help set up affordable payment plans but don't always deliver on fixing your credit right away.

While 535 is low for a mortgage, if an adviser can tell you what needs to be done to improve it....
You may be able to qualify for a FHA loan if you can get your score closer to 600, for Fannie Mae and Freddie Mac backed loans, your score needs to be around 620 or so.

It's not hard...only takes a little time.

Web Reference:  http://www.sdhomeguy.com
0 votes
Ethan Besser, Agent, Cherry Hills Village, CO
Wed Jan 6, 2010
Hi Fire976,

Unfortunately you will likely have trouble qualifying for a loan with your credit score. My advice to you is to find a credit repair company and get to work repairing your credit so that you can buy a home. Try Lisel Thompson at Newsed Community Development Corporation 303-534-8342 Ext 107 and tell them that I referred you. I think that they will not charge you to use their service.

One other avenue that you should explore is try to find a property that is being lease optioned (check craigslist or ask a realtor in your area). This will allow you to get into a house that you can live in while your credit is being rebuilt. You can either make payments until you own the house, or you can buy the house earler when your credit is repaired.

I hope this helps!

Also, please let me know if you or anyone you know is moving to or from Denver. I would love to help them with their real estate needs.

Thanks and best regards,

Ethan Besser
Broker Associate
Keller Williams - DTC
Cell: 303.856.8980
Fax: 303.221.2289

The Besser Choice in Real Estate!
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