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My wife and I are looking to purchase our first home, as we feel we're throwing too much money away and paying too much renting these days.
We have no children and don't need anything huge, we're looking in the Windsor area. I have stable employment making 40K/year, but due to credit problems in the past my score is only around the 600 mark and the bad marks will be on there for another 3 years (no bankruptcy, but do have charge-offs)
I spoke with one lender who does FHA stuff, but they said the minimum score was 640. I've read online that different FHA lenders vary and some will go as low as 580.
Can anyone recommend lender(s) that might work with us and/or housing counselors in the Windsor area?
Right now we're paying roughly $1200/month for our apartment, and during the winter months that jumps to almost $1600 because we have to pay for our own heat and the place isn't very energy efficient and we've got 1800 sq feet.
I'm thinking we might be able to get a home in the 50-125K range, maybe with an FHA 203K for rehabing the place if needed, and pay significantly less than the $1600/month we'll get socked with this winter while earning zero equity.
I don't think you have an option. FHA is strict, and is getting stricter every year. The ~640 requirement is what it is. It's set by FHA and the federal government.
I would focus on getting your credit score up. Some ways you can do that are paying down credit cards and checking for any erroneous information.
You are between a rock and a very hard place and it's best not to get your hopes up. HUD/FHA minimum credit score is actually 530- and that means nothing in the real world.
A score below 580 requires a 10% down payment from the borrower which must be from his own funds. A score of 580 or over requires a 3.5% down payment which can be from gift money, own funds or a 6% seller concession.
But back to the real world. You're not likely to find a lender doing a loan for under 640 , maybe 620 - why? RISK - they're just not willing to risk it. Lenders can't go below FHA minimum requirements for a loan, but they can require more stringent requirements that FHA's minimums. Right now they all do.
Those charge offs are going to destroy any chance of a loan. You might do better to try to repair your credit. You can negotiate with a your creditors to remove those charge offs by paying them. Try an offer to pay for a written agreement to delete the charge off. Pay to delete it's called. Or if you can't get that, try a " pay to close account" agreement.
Not trying to be mean here, but look at this from a bank's perspective. Lenders aren't interested in making your life easier, helping you out etc. They are about doing things that makes sense to their profit and loss bottom line. So here you are, walking away from past debts and now you want to buy a
house, using a very low money to no money down program. And doing that in a buying climate where home values are shaky/maybe still going down. How risky does that look to a lender ?
Seriously, you might want to talk to a credit counselor rather than loan officers to repair credit rather than taking on more debt. Again, not trying to come off as harsh, just realistic. Good luck
That's ridiculous. I thought they tightened things up and didn't just arbitrarily raise premiums for responsible buyers. Guess that's too much faith in the gov't.
When I got a loan from BoA, I believe their min. for an FHA loan was around 630-640.
Thanks for the input everyone. I am working to rebuild my credit. I'm in no position to pay to delete the charge-offs (unless they allow you to do it for significantly less than the balances they show?)
I do have a single credit card now with just a $750 limit and I am keeping its monthly utilization below 30% to help rebuild my score (we try to buy everything with cash as best we can)
I saw QuickenLoans was offering for scores 580 or above, although I believe they had more upfront costs than other lenders.
Originally we were planning to find another apartment that's more affordable (i.e. won't cost us $1600 during the winter months when factoring in heat) for another year or two before buying, but then I saw some stuff on FHA loans and looked at Realtor.com and saw some homes within a budget we can afford (that would be cheaper than renting) and figured maybe that's the way to go.
Whatever we do, I want to make sure we get out before this winter so we aren't eating the higher cost at the current place
Prior to 2010 , FHA didn't really even have a minimum score. However, as I've noted previously , lenders take care of that ridiculous thought by using their own underwriting standards, which right now are in the
640 range for FHA loans.
Anthony, if you look into Quicken loans, be careful about fees, rates, etc. and hidden costs. You may be paying many points higher than the typical rate, have lots of mortgage insurance added in, more than typical and have other fees amounting to thousands. Research them on Google, you may find lots of negative opinions. Follow that old axiom- if it sounds too good to be true , it's usually really bad.
Perhaps you might consider simply moving to the cheapest place you can find in a decent area for a couple of years or so and put aside any rent savings to fix credit or build closing costs, etc.
Remember,as frustrating as it seems right now, it's just a blip in the road. Things can turn around for you in a few years. Good luck
Thanks Willow. I just hate being in a position where I'm putting in 1600/month when I could be saving a good chunk of that money instead AND building equity. I did see a few negatives about Quicken, just feeling the pressure cause the colder months will be here sooner than I'd like and I don't want to get stuck paying heat this year :P
edit: yes, if we get our own home we'd be paying heat, but it would still be cheaper when compared with our current rent plus heat costs
Last edited by anthonyfromMA; 07-27-2012 at 11:19 AM..
Yes you can settle charge offs for cents on the dollar. Some tips.
Offer them something low like 10 cents on the dollar and offer it as a lump sum, right now lets get it done.
If they agree to a number, get it in WRITING before paying a dime and do NOT give them ACH access to your account.
If you get those charge off's cleared up, your score should head up. What it will show is "debt settled for less than the original amount". It's much better than a chargeoff.
Keep in mind if you are monitoring your score from one of the sites that actual lending scores come in a bit different and they do an average.
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