What options does a homebuyer with a good income but bad credit have?

Asked by Juicedformovin, Seattle, WA Thu May 16, 2013

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6
, ,
Fri May 17, 2013
Good morning Juicedformovin,

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.
http://www.consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.
http://www.consumer.ftc.gov/articles/0058-credit-repair-how-…

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140

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1 vote
, ,
Thu May 16, 2013
Improve the credit by paying down credit card balances to below 30% of limits or paying off unpaid collections etc.....

If this is already done ....get pre approved to see if present credit scores will allow any options
1 vote
Invstnlfp, Home Buyer, New York, NY
Mon Feb 22, 2016
I work for a direct lender in the mortgage industry who offers conventional, FHA VA, and USDA loans in 47 states. For VA home loans it's NO down payment. Are lowest score we accept for government loans are 550 when most lenders require a 620 and brokers a 580. You have to have two years of income with a score over 550 with bankruptcies discharge date 2 years and over. We have basic guidelines and a pretty easy process. Feel free to text me or call me anytime up to 10:00pm Eastern with any questions.
Brian Young 214-797-3479. NMLS#902687
0 votes
Jennifer Oha…, Agent, Bothell, WA
Thu May 16, 2013
Lease to own may be the way to go if you can find it. In this market you'd have to offer pretty good terms.
Or perhaps some one who is selling as a short sale might find that a win-win. You can rent-to-own until the your credit and the market rebounds and they are no longer in a position where they have to short sale OR they can get rental income from you until the short sale is completed. Hopefully your credit could be restored by then.
0 votes
Ray Akers, Agent, Seattle, WA
Thu May 16, 2013
There are options for a homebuyer with good income and bad credit, however all of those options will come at a higher interest rate. Seek a portfolio lender, or private financing (by the seller). And, start working on cleaning up your credit immediately. You can easily improve your credit rating in just a 3 to 6 months. DO NOT pay for any services that promise to clean-up your credit. They are usually scams.
0 votes
Johan Tong, Agent, Seattle, WA
Thu May 16, 2013
I have worked with many first time home buyers who have the initial down payment but have a low credit score.

Credit score is the key to determine your interest rate and your monthly payment. By putting down a large down payment, you can lower the interest rate. However, if you have a bad credit, large down payment will not help you much.

The best recommendation for you is that, talk to the loan officer you are working with now, and ask her ways to improve your credit. There are two extra things you can do if you don't have a loan officer to work with at this moment.

(1) Ask for your FREE annual credit report, and look for any credit error that you can quickly dispute and bring up your credit. To do this, go to https://www.annualcreditreport.com/cra/index.jsp

(2) Find a credit analyst to work with. You need to pay them, but the bucks you spend will be worthy.

If you want to save a bit of money and don't have a loan officer to work with. I have a lender who has been in the business for 25 years and has been working with first time home buyers since the first day she is in the business. We can work together to help you. For more information, email me at johan.tong@century21.com or go to my website:
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