My credit score is about 540 and husband is worse. Good income. Bills are paid. Is a 1st home loan possible?

Asked by Amber, Oregon Fri Oct 26, 2007

We have very little debt now,, no credit cards. One car payment around $300. My husband has a decent income, over $3000 a month. We are waiting for our credit score to go up and we are wondering if its too early to look into a home loan. We pay almost $1000 a month for rent now and have been doing so for over a year. Think there is any possibility of an approval?

Help the community by answering this question:

+ web reference
Web reference:

Answers

24
Mike Kelly A…, Agent, Santa Rosa, CA
Fri Oct 26, 2007
Amber, I wrote the following response to a question by a person who had a 500 credit score. What credit scores tell us and the lender, is your ability to manage your debt and credit. Having a 500 credit score is not indicative of someone who has yet learned to do this. I think it is in your best interests to practice managing your credit with unsecured debt and car loans before getting way over your head with a major home purchase! Consider this: a credit score of 720+, really great credit score, will get you an interest rate of 6.30% and using a $200,000 loan your principle/Interest payment will be $1,238.00. Your current credit score of 500 will get you an interest rate of 13.379!!!! payment of $2,272. Over the course of the loan you'll payment amost $400,000 MORE in interest payments!! WHY DO YOU WANT TO DO THIS!! Your payment is a staggering 100% MORE than those with geat credit. I refer you to the web site http://www.myfico.com for reference and how to get you back on the right credit track.
It's not so much that you COULD find a loan to get into a home but WHY would anyone put you into that situation with such unmanaged credit skills which would no doubt lead you to a bigger mess. I would rent, build your credit score up and then, once you're comfortable with HOW to manage money and credit, go and sit down with a lender to see if you want to go prime time with a home loan. For now, RENT!! And be very wary of anyone who wishes to get you INTO a home!!
3 votes
Andrea Gomez, Other Pro, San Antonio, TX
Sat Aug 10, 2013
You can get approved with under a 600 credit score for home loan, I am not sure about a 540. I have had clients with a 580 credit score get approved for an FHA loan just 3.5% down, The Lenders Network is the place to start for any questions loan related. If you need help to get your scores up they can help with that too.

Good Luck!
2 votes
Joseph Ferra…, , New York County, NY
Fri Oct 26, 2007
Yes. It will all depend on how much you are able to put down. You will not get the best rates, obviously...but as your credit score increases you can qualify to refinance at a lower rate. You loose nothing by shopping around now.
2 votes
Irena, , Newton, MA
Fri Dec 7, 2007
You definitely have to work on getting your score up. It is now more difficult than ever to get decent financing as a direct result of all the mortgage-lenders mess that many lenders have generously left behind.
You said that you do not have any credit cards. That is not good. You need to have at least two cards in your name. Make minimal purchases of for ex. $50 here and there and do pay it off on time. The lenders want to see your payment history but also that another company is willing to lend you money. You need to hold on to the card for couple of years. If you have any credit cards keep the ones you have the longest and by all means never pay late for anything.
Also check your credit reports via http://www.free-annualcreditreport.org/, and this website offers some more resources http://www.ftc.gov/bcp/conline/pubs/credit/freereports.shtm.
If you haven’t ordered one this year do so ,and for next year order one every 4 months either Equifax, Experian orTransUnion.
Check your credit reports for any inaccuracies and straighten them out with the agency.

You will be fine, you are doing great and keep saving. Good down payment is a good tool to get reasonable financing conditions.
Web Reference:  http://www.irenamagzelci.com
1 vote
Nathan Juarez, , Bandon, OR
Fri Oct 26, 2007
YOU ARE IN LUCK! FHA loans don't even look at your credit. That is the beauty of Federally secured loans. If you have not yet purchased a home, then you can qualify for an FHA loan. I beleive the lender will require 3 years of tax returns to verify whether or not you have owned a home in your past. The best step you can take is talking with a mortgage lender. Not a brokerage. Your loan origination fees will be smaller if you talk with a conventional lender, plus you can rest assured that they are not some fly-by-night outfit like we have seen in the past. Talk to your bank about who handles FHA loans and then talk directly with that person. If your bank does not have someone who specializes in this type of lending, talk to another bank who does. Bank of America is really picking up the pieces of the mortgage fall-out, so they are very willing to work with new buyers. No matter who you choose, make sure they are reputable. The best part about an FHA loan and the current housing market is that you can request the home seller to pay for your closing costs and minimize your out-of-pocket expenses. Or, ask your lender about the Oregon Bond Measure, this may or may not help depending on your household income level. Where in Oregon are you planning on purchasing?
Web Reference:  http://www.bandonview.com
1 vote
Carrie Crowe…, Agent, Southaven, MS
Fri Oct 26, 2007
Amber,
It is really a really tough mortgage market right now for people with low credit scores. With so many lender closing their doors and restructuring I would say it would be very difficult. Sounds like you are working to get your scores back up! This is a good thing. I would recommend you talk to a mortgage lender and see where they think you need to be to get a loan, and what the best route would be to get there. If you were to find a loan, you would likely pay a very high interest which may not be worth it at this time. Keep putting money back and keep working to clean up your credit.
1 vote
mumblestwith…, Renter, Owosso, MI
Sun Nov 25, 2012
No, the banks are run by twunts that have decided that you're a horrible person. I've a 540 and I can't get a credit for a $500 worth of new tires. Your best bet is to just keep your bills up to date and get your score considerably closer to 1000. Think of credit scores like grades in school where anything under 600 is bad.
0 votes
Replace "bad" in the last sentence with "is a complete failure."
Flag Sun Nov 25, 2012
Amanda Hannen, Home Buyer, Lumberton, TX
Wed Oct 17, 2012
me and my bf are in the same situation. we live in texas i have a 700 score he has a 540 we want to buy a 115,000.00 dollar home but no bank will finance us. i have had 4 car loans in my lifetime and also credit cards and have NEVER been late on ANY pmts but still they see his credit and wont help us does anyone know of anyone in this area that can help PLEASE fill free to give my number to them 409-767-3346 if i dont answer please leave a voicemail and i WILL get back to you! we have about 6000.00 dollars to put down!


Amanda
409-767-3346
0 votes
Amanda Hannen, Home Buyer, Lumberton, TX
Wed Oct 17, 2012
i am also in this same situation, my bf and i have been trying to buy a house and i have a 700 credit score and he has a 540. we have roughly about 6000.00 to put down on a house we live in texas does anyone know of anyone out here who will finance us i have NEVER been late on anything i have owned. i have had 4 car's that have been financed and also a credit card. i am a very responsible person im just young and so is he. please let me know if you know of anyone we can talk to. 409-767-3346
0 votes
Jake Johnson, , Melville, NY
Tue Mar 17, 2009
Hope is here!! My company is one of the nation's largest FHA lenders and we will do loans down to 500 credit scores on refinances(97.75% financing) and 531 on purchases (96.5% financing). I can almost guarantee you that there is very few if any lenders at all doing these loans right now. We are a direct Ginnie Mae lender and are making it happen. If you are dealing with a broker, switch to a direct lender because there isn't a bank they can put you through that will close these loans. I know, because I was a broker-owner for 5 years. If you are below these scores, we can create an automated report for you on what exactly you need to do to give yourself the few points you need. I have been in the business for ten years and there is a reason why I am with this lender. You can call me at 888-536-3001, ext. 1540 or email me at jjohnson@lendamerica.com. Talk to you soon!
0 votes
where are you located and do you do loans in texas!?! i AM VERY intrested me and bf are looking to buy a house. 409-767-3346
Flag Wed Oct 17, 2012
FHA Expert, , Atlanta, GA
Fri Jan 2, 2009
Yes, it is possible. FHA is not credit score driven. With your score being a 540, the file will have to be manually underwritten. You will need a lender, not a broker for this situation. A lender will have to underwrite the file in house with their FHA underwriter. The approval will still depend on other variables: debt to income ratio, employer, assets and full documenton with bank statements, W2's and check stubs. Best of luck
0 votes
D, , Oregon
Fri May 2, 2008
Hello Amber,

FHA financing currently requires a 600 score. Conventional financing requires a 620 score (up to 90% of financing). There are portfolio programs that will take a 540 score with 25% of the purchase price as a down payment. You mention you have very little debt but you still have some. 30% of your credit score rides on if your current credit card balances (or any revolving account balances) are over the half way point of your limit. Start with the smaller balances first...look at what their limit is and try to pay those down to at least the halfway point. Your credit score will go up faster if you pay down all balances to at least the half way point then to pay off a credit card in full and leave another one maxed out. Any collection accounts (if this applies) needs to be on a payment plan even if it's only for $20 a month. It shows intent to pay.

If possible, don't allow any delinquencies to occur. If you are late on payments, you are showing little intent to pay on something that would have a large price tag attached to it. Don't allow any accounts to go into collection, make payment arrangements before it goes to collection.

Crystal Beard - Ambient Home Lending
crystal@ambientlending.com
http://www.ambientlending.com
541-858-2522
Toll Free 877-777-9763
0 votes
Debt Free Da…, , 85260
Tue Apr 22, 2008
An FHA may be the way to go. They are easier to qualify for than conventional financing.
Web Reference:  http://GetPrequalified.com
0 votes
Selena McNei…, Agent, Bend, OR
Tue Apr 22, 2008
Dear Amber,
I have several mortgage brokers that I work with that would be more than willing to talk to you about the possibilities of qualifying to buy a home. Please let me know if you would like me to get them to contact you or if you would like their information? I have some clients that have a similar situation to you and they are buying a home very soon. Where in Oregon are you looking to buy? I would be happy to help you out, just let me know.

Have a great day!
Selena McNeill, Broker
Century 21 Gold Country Realty
376 SW Bluff Drive, Suite 8
Bend, OR 97702
541-390-0595 Cell
selenamcneill@yahoo.com
Licensed in the state of Oregon.
0 votes
Osmaida Esca…, Agent, Las Vegas, NV
Tue Apr 15, 2008
You might want to get that score up or else you might have trouble getting a home loan. IWork with a good Loan Officer who can help you clean your credit.
0 votes
Sarah Eubanks, , Oregon City, OR
Tue Apr 15, 2008
Great question Amber. While FHA is not driven by FICO, I would say that we should work on getting your credit repaired. Whether you choose to go with the FHA program or work on your credit or both, I would like to see those scores be elevated for your future. There is no time like the present to get it handled.

I would love to have the opportunity to help you out with your choices and decisions. You are in a good place and time right now. And truly, the market will more than likely remain in your favor for several months...enough time to get some help in increasing those scores.

Please feel free to contact me at 503-442-1349.

Best Regards,
Sarah Eubanks
Senior Mortgage Specialist
Hill Valley Financial Services
0 votes
Chris Courtn…, , Eugene, OR
Wed Mar 5, 2008
FHA is your solution. Steve Gabriel at CrownMerit.com can assist you as he is licensed in Oregon, located in the Portland area and is an FHA approved lender. His direct line is 503-888-2297. Tell him Chris@HouseNow.com sent you so he will buy me lunch!
Web Reference:  http://www.CrownMerit.com
0 votes
Ed Eggling, , Clackamas, OR
Wed Mar 5, 2008
A good place to start looking for a mortgage when your credit score is a challange is with a non profit organization that helps buyers understand the home buying process and helps them determine the maximum priced home they should look for. Several of my clients have used ACORN Housing. There only fee is $20 for a credit report. They will work with you to help raise your score and reduce or waive as many fees as possible including PMI. They are funded by Bank Of America. Their local phone number is 503-788-9989.
0 votes
Salt Lake Ag…, , Salt Lake City, UT
Fri Dec 7, 2007
0 votes
Cassandra Sk…, Home Buyer, Canal Winchester, OH
Fri Dec 7, 2007
I'm in the same situation. I'm not a realtor, but I have checked with them and you may want to try what I'm trying, rent/lease to own.
0 votes
Darin Provost, Agent, Portland, OR
Fri Dec 7, 2007
I think someone here mentioned FHA financing... This is a great (and about the only) tool for credit challanged buyers. Be sure to ask your lender to see if you can qualify. An FHA loan allows a very low down payment with easier to qualify debt ratios than conforming loans. I believe they have also eliminated their own home inspections and relaxed on the appraisal reguirements.
Web Reference:  http://www.darinprovost.com
0 votes
Darin Provost, Agent, Portland, OR
Fri Dec 7, 2007
I understand credit scores range from 300 to 850, with 579 being the lowest to qualify for real estate financing. 720 or above should be automatic with loan approval. ...use this as just a guideline as the industry is in flux and much of this depends on a down payment and other things.
Web Reference:  http://www.darinprovost.com
0 votes
Debt Free Da…, , 85260
Tue Nov 6, 2007
It is possible but you will need about 30% down to make it work. The rates would probably be around 9.5% or more. I would work on getting your score up.
Web Reference:  http://getprequalified.com
0 votes
Ken Herrera…, Agent, Las Vegas, NV
Fri Oct 26, 2007
Hello Amber,

I have to disagree with Michael in the aspect of what a credit score tells a lender. There may be many reasons your credit score is so low, it doesnt specifically mean you have not learned how to manage your debt. You are not 5 yrs old and nor should you be treated that way. Your credit score may have faltered due to medical bills, fraud and or countless other situations that come up in life. Bad Credit does not equal bad person. Keep your hopes alive as eventually you will be able to purchase a home. When you do choose to find a home, pick an agent who will encourage you, not drag you down.

Good Luck,
Ken Herrera
Century 21 Infinity
http://www.C21Infinity.com
Web Reference:  http://www.C21Infinity.com
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more