Profile picture for sarah644

How can I get a mortgage with credit score just below 600? Have 20% down payment and plenty of incom

  • June 26 2009 - Red Wing
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (27)

Profile picture for Pat Sanford
Nike thanks so much for your help. I kind of wish I was moving to IL so you could help me.
  • June 28 2009
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Good for you, Sarah. Please work closely with your chosen professional.  Make sure to give as much information as you can, so they can advise as to your best way forward.  Also, please make sure they have enough variety of Mortgage programs, and are well versed in the programs, to give educative and intelligent options regarding your situation.  Even if you can't buy immediately, they will at least give you a concrete plan to follow.
As I said before, I would consider your application before I would consider a 700+ score client with no reserves or income.  You are almost there, so don't give up now.  The FHA loan suggestion is not based on your downpayment, but on the best rate program available for you if you have less than a 740 score.  Even if you put the total funds available on a downpayment, there are "hits" to your rate when your score is below 740 and your rate will increase.  Note that the FHA loan comes with mandatory Mortgage Insurance so let your professional show you actual figures based on different loan types, then choose the best one for you.
You seem to be very clear on what you are trying to achieve. If you pay $2400.00 a month in rent, and have paid on time, it seems like you can certainly afford a $190k property.  Your debt ratio etc will have to be figured out by your Lender though.
Let your Lender be your guide, and be VERY VERY CAREFUL who you choose to work with.
Good luck to you.  I hope it all works out well.
  • June 27 2009
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And I already know I said advise instead of advice ... wish I could edit but life goes on.
  • June 27 2009
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Maybe you need to re-read my answer Sarah, I was not rude at all, I advised that you fix your credit instead of trying to buy now. I gave you sound advise as a professional should do, but you seem hell bent on making a stupid financial decision. Sorry you don't like reality, but I don't dish BS. As for finding someone to help you ... you deserve everything you will get.

Here's what I told you, please point to the rude part in my advise to you.

"I'm sure you will get many responding shortly telling you how you can get one, but I'd urge you to work on your credit rating because any programs that are still in existence to accommodate this will be costly. Promises that you can always refinance to a better rate later, after you fix your credit, are load of hooey so don't fall for it. Fix the credit first and buy at a decent rate to start with. If you have plenty of income and have managed to save for 20% down, you seem to have the tools to fix your credit fairly quickly."

Next message to you was as below, again, I ask you to point to the rude comments towards you:

"Sarah, you should wait for your scores to go up so you don't end up being taken by people far too hungry to make buck off of you rather than help you. Don't buy into the self righteous  BS that some throw out there and hope it sticks. People like Nike and his doppelganger are not at all interested in your well being. Working your score up a few notches will save you in the long run. If you have that much down, you should work your score to a place where a conventional loan works for you. What I was trying to explain to you and the shoe salesman was that an FHA loan is not in your best interest if you have that kind of down payment. Get your scores up!"

This Sarah, is called advise! Next time you ask for it ... please read it.
  • June 27 2009
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Profile picture for Myersteam_1
If you have 20 % to put down in todays market you should have no trouble finding a seller who will owner finance.
  • June 27 2009
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Hi Pat,

Ufortunately,  I only originate loans in Illinois.  However, my advice to you will be generic enough.
You should really first educate yourself as to the pros and cons of home ownership.  For a First time homebuyer, I think you are doing the right thing by trying to find out as much as you can before you buy.
You should get a copy of your credit report (www.annualcreditreport.com), go over it and try to fix any problems you spot.  Remember that too many inquiries, high credit card balances and too many open accounts can affect your credit scores too.  Check that there are no unusual names, social security numbers or addresses showing up on your credit.  This is becoming a guideline issue for many Lenders now, because of recent laws on credit.  If you spot any problems, call email or write the bureaus and dispute them immediately.  Keep checking with the credit bureaus until everything is cleared up (i.e don't take it for granted that they have fixed the problem the first time you dispute).  
Secondly, please save up as much as you can.  The FHA loan requires 3.5% downpayment and additional funds to close the loan. There are different Lender programs, but almost every one of them also wants to see that you have some "fall back funds" called reserves in your bank, after you close.  Most companies look for a minimum of 3 times of your full monthly payment.
Of course, you need to have a job that pays enough income to qualify you for the loan.  Your college diploma actually serves as credit towards the 2 year job history you need, so a copy of the diploma, your letter of employment and first paystub should be sufficient to meet that requirement.  Also note that usually, you want to have no more than 43% (the Freddie Mac requirement) of your income going towards all the bills on your credit, plus your total mortgage payment - principal, interest, real estate taxes, home insurance, and condo association fees if you buy a condo.
When you get ready to apply for the loan, call at least 3 different Lenders and make sure they have the programs you are interested in.  Don't be discouraged by any Lender who tries to put you down.  Usually it is because they don't have the programs you want in their portfolio, or never took the time to educate themselves enough to be able to assist you with a variety of options.  Keep calling until you find someone who is knowledgeable about the mortgage options, can intelligently explain them to you, and treats you with the courtesy you deserve.  They will prequalify you for the best purchase price, loan amount, interest rate and downpayment available to you.
Then find a Realtor using the same guidelines I gave you in the paragraph above.  They will help you pick out a property and write your contract. 
Once your contract is approved, get a Real Estate attorney immediately.  They should review your contract and protect your interests legally throughout the process.  A lot of people make the error of thinking the Attorney only comes to the closing with you, but this is not the case.  The sooner you retain the Attorney the better.
Then you simply provide whatever documents you are asked to, and you should be able to close on a property without too much stress.
Remember, educate yourself well, find professionals who will work hard for you and treat you with respect and go for it.
Good luck to you, both in college and in the homebuying process.
I will also post this in your question post on the other thread.
Sincerely,

Nike
  • June 27 2009
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Profile picture for sarah644
No Greg, I was just curious if I could get a loan or not. And you decided to be a rude a$$hole. I would hope that you do not treat your actual clients as horrible as you respond to my question. I am not mad about the truth that I can not get a loan. I just thought if someone would hear the whole situation rather than just look at my fico score to decide if I could get qualified. Thats all. I know my credit is not great, but I didn't realize that that was the only thing you jerks look at. It just doesn't make sense that someone who may have a higher score than me, but doesn't have a decent down payment or a decent income could get a mortgage and I can not. Anyways, PLEASE stop responding as I have already contacted someone who is willing to work with us.
  • June 27 2009
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Profile picture for Pat Sanford
Hey, Nike do you by any chance do loans in Missouri as I am moving there when I graduate.

Thanks
  • June 27 2009
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"THanks Nike and the few others who actually gave me advice, which I was looking for."

Sarah,

That's your problem in a nutshell, you wanted to hear what you wanted to hear and not the truth. I gave you the truth and you don't want to accept the advice so don't ask next time. If you want to buy a house at inflated rates because you won't take the steps to properly prepare yourself, go right ahead, just don't expect any reputable lender to assist you. If you want an inflated FHA loan when you could get a conventional loan by taking corrective action on your credit, go right ahead. If you want to bury yourself in a house that you have no business buying right now, go right ahead. You have been turned down already and seem to want to get a different answer without changing the basics of why you got turned down.

Have a great day.
  • June 27 2009
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Aloha Sarah,
I have been working with a lot of people that are facing credit score challenges and creditors are not helping the situation with their actions.  However, I work closely with financial planners and experts that help my clients raise their scores to fit their situation and get the best program for their money.  That may be one place to start, a financial expert.  It is normally free.  Once you qualify for the best rate possible in a short amount of time, you can buy.  In the mean time, you will be browsing for homes and researching the market.  Just make sure to do everything the expert says because they will ensure you the top score.  This is proven advice.
  • June 27 2009
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Profile picture for BMFPitt
I just wonder why it only matters what your fico score is. If it can go down by simply closing an account then why does that show irresponsibility?

If your score is below 600, there is definitely something wrong, and it's not just because you closed some accounts.  You claim you want to avoid "throwing money away", yet you want to get a mortgage at any cost as soon as possible, when waiting 6-12 months could save you hundreds per month.  That certainly doesn't sound financially responsible.  Perhaps you can clarify why it is that you feel that buying a house in a declining market while you owe a bunch of money in student loans and other debts is the best decision?
  • June 27 2009
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Profile picture for sarah644
Jeez, you guys are rediculous. Gregory, I really don't appreciate the answers. I never claimed to have "buckets" of money nor did I say that I haven't paid my bills. I just wonder why it only matters what your fico score is. If it can go down by simply closing an account then why does that show irresponsibility?? I'm so over all of your answers that are rude and childish. THanks Nike and the few others who actually gave me advice, which I was looking for. I didn't need to come on here to get repremanded. As far as the entitlement, I know I'm not entitled to have a home, but I have a job and we work hard to be abke to purchase a home, I'm not asking for a hand out. I don't need any more advice from any of you on here. Thanks again.
  • June 27 2009
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BTW, Gregory, I don't originate loans in Minnesota, so "lining my pockets" is not possible.Just to adance the cause of your education.
  • June 27 2009
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Courtney, thank you for setting the record straight.  Now I'm sure life can go on. 
Sarah644, as I said before, go online and call a few Lenders.  Your focus should stay right where it is. Don't give up, and don't let the answers here destablize you. You seem determined, so go for it.
Oh, Gregory, I will not be responding to you anymore either.  You have so many posts on this site.  if they are all like this, we are in big trouble in America.
  • June 27 2009
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Profile picture for Pat Sanford
Ok, So I was surfing through to see if I could find similar answers to my question because I'm new to the site and I just came across this post.  This Gregory guy scares me too.  In fact, I think I'll just go ask my questions on another site.  Hey, Gregory, can you "stalk" me down too? LMAO
  • June 27 2009
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Gregory, you are sadly mistaken.  Nike and I happened to be at the same event last night, she showed me your email, I responded - simple enough? Trust me, nothing sinister going on here.  She is a Broker, I am a Lender. So, I am in Ohio today, can you track that too?  Wow, you really scare me.
Nike, please try and post something today so this man can stop slandering you or me.   I'm sure he can track our computer locations by GPS or something. LOL. Talk about Big Brother.  Zillow should really police their sites better and enforce their Good Neighbor policy. 
Gregory, You really should either answer the lady's question and offer advice or move on to something else.  As Nike said, and I still agree, you are infantile.  And scary.  
Sarah644, read Nike's post.  Look for a Lender that is not fixated on the 20 point difference, and get a loan.  You CAN do it.  Ignore people like Gregory who can't seem to focus on the real issue at hand.Oh, and Gregory, I will not be responding to anything else from you.
  • June 27 2009
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"We CAN afford it, and we can't find anyone who is willing to help us. Not one time has anyone asked what our actual income is. Does it not matter how much money we actually make these days?"

If you have so much money, why don't you pay your bills so you have a higher credit score and stop complaining that no one will lend to you. Would you lend your money to someone with a proven track record of non-repayment?

Fix your scores with your buckets of money you apparently have, pay your bills with your 50K down payment and then worry about getting a house. You are not entitled to be a homeowner, it's something you need to work for and having good credit is a basic first step!

Wanting to buy this house so badly and at any rate and any cost is further evidence of the same financial irresponsibility that has resulted in the low credit rating you are dealing with now.
  • June 27 2009
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Profile picture for wetdawgs
It seems everyone has understood your question and has answered how to make it easier.  As you've been asking, perhaps you've already tried and been rejected?

There are occasional lenders who will lend with credit scores below 600, but they are very rare.   Have you put in a request on the Zillow mortgage marketplace?    If there is no one there who is willing to offer you a loan even with an incredible interest rate, then perhaps you have your answer.     If ZMM fails you, then your local credit union where you've had a long term relationship and where you can have face to face discussions with the loan officer may be your best bet.

You clearly know that there is a reason lenders don't like credit scores below 600.   The economy is in a mess and lose lending practices have contributed.   A low FICO score suggests there have been financial decisions in the past that were not the soundest.   You've identified those, so can move beyond.

Renting is not throwing money away in the current climate.  It may be saving you money.

  • June 27 2009
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Profile picture for sarah644
Well no one is understanding my question.  I don't care if we have a higher interest rate, we just want to get a loan for a house. We do not want to rent for a year and throw more money away for someone else's mortgage. I don't understand why all the answers have seemed to imply that lenders would be "pushing" us into a loan we couldn't afford when it's the complete opposite. We CAN afford it, and we can't find anyone who is willing to help us. Not one time has anyone asked what our actual income is. Does it not matter how much money we actually make these days? SO if our stupid credit score was higher, but made less money, we'd be able to get a loan?? Where is the sense in that??
  • June 27 2009
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Nike, AKA Black Courtney, you are delusional and when Zillow looks and sees that you are posting from the same IP, pretending to be 2 different people, it will be very clear what your pathetic motivations are.

May I suggest you acquire a life and move on.

Sarah, you should wait for your scores to go up so you don't end up being taken by people far too hungry to make buck off of you rather than help you. Don't buy into the self righteous  BS that some throw out there and hope it sticks. People like Nike and his doppelganger are not at all interested in your well being. Working your score up a few notches will save you in the long run. If you have that much down, you should work your score to a place where a conventional loan works for you. What I was trying to explain to you and the shoe salesman was that an FHA loan is not in your best interest if you have that kind of down payment. Get your scores up!

  • June 27 2009
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Profile picture for sarah644
I appreciate all the answers. What I truly don't understand is why everyone is so fixated on "waiting" for my credit score to go up. I currently am renting in Hawaii for $2400/month and have never had a problem making the payment. The reason for my credit not being so good is from being a college student for 7 years and not being able to make enough money to get by and ended up with all the student loans and a few credit cards. I am almost debt free. My husband is working for a family business that has been around for almost 40 years and I have a full time job offer in MN as a dental hygienist. All we want to do is buy a house (approximately 190,000) and we have 50,000 for a down payment. We will obviously be able to afford the monthly mortgage, tax, and insurance payments. Can someone please recommend a lender in MN that would be willing to work with us on getting approved for a loan??
  • June 27 2009
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Wow, go Nike!  As a woman in this field, you make me proud. I found Gregory's post truly infantile too (LOL, GREAT word!).  You are so right. We really should get back to the business of giving advice and stop the petty bickering amongst ourselves.  I found Gregory's post to be rather sad...such pettiness..And what was the dig about the name for? 
Nike,  keep doing what you are doing.  Some of us think you give excellent advice.  I do remember the manual underwrite days with great fondness.  I have actually learnt from you today, and thank you for that.
Yeah, be genteel and all that and ignore Gregory and all others like him.
  • June 27 2009
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Actually. Denny, no that is not what I was suggesting.  As an FHA certified Underwriter since 1997 as well as a Certified Mortgage Consultant (CMC), who has originated FHA loans since 1996, I am STATING, not suggesting that there are still Lenders out there who will manually underwrite this file and based on the criteria I also stated, approve her for a standard, regular old run-of-the-mill FHA loan.

To clarify, that would mean a 3.5% down payment, the exact same rate as any other FHA loan out there today i.e 5.5% as at Friday, and every other FHA benefit eligible. 

I assume you are a Lender or Banker, and are limited only to your Bank's programs.  I must also assume, since you apparently did not understand that part of my post, that you were not around in the days when there were no Fico scores and we actually looked at the borrower's TOTAL profile, rather than one item, a credit score, to issue FHA  loan approvals.

As a professional offering advice, education is the key.  If you had just stopped to research the FHA manual underwriting guidelines, I am sure you would have refrained from posting the comments you did.  They make you seem kind of limited in your FHA mortgage guideline knowledge.You see, I have had clients with 700+ scores that I would not approve a loan to buy a hot dog.  I would however, based on the criteria I stated again, certainly consider this client for a loan, absolutely. Her profile so far, certainly merits for her to have the opportunity to put her case forward. 

As a genteel, well-educated and Christian woman, I shall ignore the rest of your post.  Your vicious words contribute nothing of value to this lady's situation and in fact, they speak more to your character than to mine.  I suggest you limit yourself to offering what advice, you can, and when you don't know, don't post. 

This site was suppossed to be to offer advice to people who have a genuine enough concern that they are on here looking for advice.  These are all adults. They are not here to be demeaned, berated or laughed at, or told they are no goods who can never achieve anything in life because of some score.

Thank God, some Lenders have figured this out, so clients do not have to depend solely on myopic Lenders who cannot see a total picture.

Sarah644, you are the focus of this post and I will keep my focus on your situation. Please don't allow yourself to be discouraged.  I believe that you will find your path, and I believe that if you are ready to do your part ad work for it, you DO have enough going for you, to contact a Lender (who can see beyond a FICO score, and there are still some out there), and get real, personalized advice as to which way to go.

It's really funny though, that I actually had another professional from this post email me directly and thank me for giving "solid advice".  Thank you Sir.  Your email gives me hope for this site.

Finally, the moral of the story is..let's stick to the advice and if we have nothing of value to contribute, let's not resort to throwing out infantile insults. 

Thank you one and all, and good night.
  • June 26 2009
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So Nike, you are suggesting that rather than fixing their credit score, they get an FHA loan, with 20% down, pay the 1.75% UFMIP, the monthly mortgage insurance and be subjected to higher rates all in the name of what ... lining your pockets?

I thought the last of your type was already weeded out, but I guess not. Nice of you to show up and make my prediction come true! Love the name however, maybe selling shoes is your true calling.
  • June 26 2009
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Hi,

There are still Lenders that will give you an FHA loan with credit scores as low as 580 so long as you had no late payments on your credit in the last 12 months.  You may need cancelled checks for your rent etc.  this is the way FHA loans were underwritten and approved in the days before the FICO score, and it worked pretty well. The FHA loan would give you a 30 year low fixed rate.  The FHA loan looks at what we call "compensating factors" and with 20% and good income (which would mean a low debt ratio), your loan would receive manual underwriting and you could get approved.
Sometimes the low credit score is due to high credit card balances, recent inquiries, or even closing out of accounts, and may not necessarily equate to non-payment of bills. 
Even after you have purchased your home, you want to check your credit at least once a year (go to www.annualcreditreport.com) and work on the factors mentioned above. 
It is true that a lot of Lenders (rather arbitrarily) have set the minimum credit score at 620, I have seen clients with 660 scores that I would deny in a heartbeat as an underwriter.
Hopefully one day, we will go back to commonsense underwriting instead of being enslaved by three figures on a credit report..

Find a good Loan officer and you stand a good chance, and do't be bogged down by all you hear or read..

Good luck to you and I hope you achieve your dream..
  • June 26 2009
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Profile picture for real estate mike
Should not be that big of a deal for you to get your score to 620 which I believe is the f.h.a. minimum. There are many mortgage pros on this site I hope you can connect with one.
  • June 26 2009
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I'm sure you will get many responding shortly telling you how you can get one, but I'd urge you to work on your credit rating because any programs that are still in existence to accommodate this will be costly. Promises that you can always refinance to a better rate later, after you fix your credit, are load of hooey so don't fall for it. Fix the credit first and buy at a decent rate to start with. If you have plenty of income and have managed to save for 20% down, you seem to have the tools to fix your credit fairly quickly.
  • June 26 2009
  • 1Yes

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