I have C.S. of 540, should I try and buy now? or wait 3 years when my score will be higher? I have no downpay.

Asked by Susan Kussow, 54304 Wed Sep 19, 2007

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Pam Winterba…, Agent, Danville, VA
Wed Sep 19, 2007

I would work on increasing my credit score. 100% percent financing with a credit score under 720 is next to impossible.

You might be able to get a FHA loan with your current credit score if you had a 3% down payment. Your best bet is to increase that credit score to work towards getting a good loan.
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Patti Pereyra, , Chicago, IL
Wed Sep 19, 2007
Hi Susan:

I would wait.

There are many reasons people can fall on hard times and, as result, suffer from impacted credit, so without knowing what the reasons are for why you are where you are, I would just advise that you work on bringing it back up and save some money for a future down payment.

It's increasingly difficult to obtain 100% financing these days, especially with a low credit score.

Here is an article that might help you: Tens Ways to Increase Your Credit Score (link follows) http://millionster.com/articles/debt/increase-fico-credit-score/

Work out a good plan and best of luck to you in meeting your goals!
2 votes
Lora Bladow, , Schofield, WI
Mon Sep 24, 2007
My suggestion is also to wait. HOWEVER, if your goal is to purchase a home sooner than later, I would NOT wait to get started with working on your credit score, starting to track your finances to see where you can make improvements, and WHY your credit score is so low. There are so many great resources for credit counseling. PLEASE BE CAREFUL THAT YOU ARE WORKING WITH A NON-PROFIT COMPANY IF YOU CHOOSE TO GO THE CREDIT COUNSELING ROUTE! Start asking friends and family if they know of someone to refer you to, or visit the better business bureau for information.
1 vote
Steven Walcz…, Agent, Green Bay, WI
Sat Apr 2, 2011
Susan, you will have to wait...
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Bennett Notz, , Green Bay, WI
Thu Mar 17, 2011

Without looking at your complete picture it's a little difficult to see where you sit, especially since a credit score is just a piece of the possible. I have a program that goes down to 500, but it requires 10% down. I see you are located in Green Bay, I am a loan officer at 1st Rate Lending in Green Bay and would like to sit down with you and help direct you in the right direction. I work with a great credit repair company named Credit Matters and it really is amazing what they can do. Feel free to send me an email bnotz@1strate.com

Bennett Notz
1st Rate Lending Green Bay
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Mark Roncone, , Naperville, IL
Wed Apr 9, 2008
Have your talked with anyone to see if you can get approved to buy a home? You should really be talking with a loan officer to see if you can buy anything first.
Web Reference:  http://www.nilhomeseller.com
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Erica Zimmer…, , 54449
Wed Apr 9, 2008
Your best option is to increase your score...you will need a 580 for a FHA loan and 3% down , plus your closing costs.
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Christiane W…, , 30067
Fri Sep 28, 2007
Please do yourself the favor of improving your credit score, saving your money, and working to get debt free. We do not know what the future will bring, but you do have control over the present.
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Fh, , Milw
Fri Sep 28, 2007
With 540 you'll need some sort of down payment unless you can qualify for down payment assistance. If you want to buy today, FHA may be your best opportunity (3% down). With the market today, there should be plenty of homes popping up in the next year. With the correct discipline, you can repair credit in less than 3 years, unless you just had a recent foreclosure, most lenders will require 3 years foreclosure seasoning.
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Ruthless, , 60558
Mon Sep 24, 2007
Why 3 years? Do you have a bankruptcy or something that is going to expire then? I would contact your local housing authority for counseling or a referral if you can't find a NON-PROFIT organization as Lora correctly suggests. I think your goal should be one year. It is close enough to keep you motivated but enough time to make some improvements to your credit score and build up some savings.
Good luck,
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Perry Hender…, Agent, Austin, TX
Mon Sep 24, 2007
Buy a house either by rent to own or owner finance. Usually it's like a lease but you are making payments to own it. You don't have top go to a bank.
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Sue Larson S…, , 53719
Thu Sep 20, 2007
You should wait. Visit your local banker, they would be more than willing to put a financial plan together for you to assist you in the rebuilding of your credit. If you need any referrals call me.
Web Reference:  http://www.suestark.com
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Ntfeldman, , Tampa, FL
Wed Sep 19, 2007
Susan. Can I ask you a difficult question?

Why, if you've demonstrated a borrowing behavior that falls in the bottom 20% of all borrowers in the US do you feel prepared for home ownership? Why do you feel a lender should take you on as a partner in a real estate purchase when you're not willing to share in the risk (with a down payment)?

I don't mean to be cruel. Home ownership is an American aspiration that frankly benefits most people shortly after they make it. But candidly, we're coming off a sticky economic situation - that was partially borne by lenders who got borrowers into homes they frankly weren't capable of carrying. They didn't have any money to fall back on when the value of their home dipped in a overly competitive market or they didn't have an equity cushion (because they were over leveraged in their property) when a situation came that required some other cash. Too many borrowers - "over tapped" and trapped - have walked away from their properties. They now get to wait out 7 to 10 years of foreclosure ratings on their credit reports and consequently higher borrowing rates but that's another thread. Do you want that in your future?

We've done no service to you as the client and no service to our industry by suggesting ways to put people into situations they've demonstrated they can't manage. You're not managing the debt you have - why do you want more?

You know, there are creative ways to get financing to purchase a home in any market. But "can you" and "should you" aren't really about credit score so much as they are about being ready to take on the risks and responsibilities of home ownership. The great American dream to own a home comes with the privileges AND the responsibility. You haven't saved to participate in the risk associated with the purchase, why do you think a lender should shoulder the risk of taking you on as a partner in the purchase of a piece of real estate?

Home prices are in the low spot on the market cycle and Interest rates are still low so for the ordinary buyer, it is a good time to buy. But with your score, you can NOT expect to achieve any of the advertised rates you see anywhere. You can expect to pay a much higher interest rate than a borrower that presents a lower risk (higher score) or contributes a much larger equity position (down payment) to the total value of the asset (home).

Frankly I would be stunned if you can find a lender that will lend to you at all in this market - but if you still insist on putting yourself in the position of being a homeowner, I would at least start by getting a lender to say "yes" to you and then making sure you understand the other costs to close. There are closing costs by the way and even if you are able to find a no money down approved purchase, you're going to have to come up with approx 2% of the purchase price to get to the closing table and pay the other fees. (which actually in your case may end up being much higher).

If you can find a lender that will take you on, at least make sure you understand the "yield spread" up front so you aren't taken greater advantage of.

Candidly, I suggest you reel in your spending on non-essentials, reduce your debt (which will help you qualify for "more house" when you are ready) pay all your bills on time to improve your score, check your credit rating monthly (there are affordable services for doing this) and clear up any undeserved poor marks that may be keeping it lower.

I'm sure this is not what you wanted to hear but in good conscience, I can't advise you on how to work around the system for loan approval. You'll be in a far better position to go into home ownership if you can truly afford it when the time comes.

Good luck to you and be patient - all things come in time and when you're ready it will be a much better place in your life to be.
Web Reference:  http://www.EisnerFeldman.com
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