Profile picture for stmido

How to find a lender-- mid score 595

Hi everyone-
I am trying to find a lender for my husband and I to buy a house, only 80,000-95,000 worth of house. We pay $650 in rent, and with a VA loan, USDA loan or a FHA loan, we would be paying less total, somewhere around $550. We are disabled, and have permanent social security income, $2000/month. My credit score is dismal, I have some student loans I cannot get out of default, and cannot pay on (very long story, the company wants all money or no money). So, we would be using my husbands credit only. His equifax is 550, experian 595, and transunion is 636. He qualifies for a VA loan. We have been told over and over that we have to have a mid rating of 620. His score is low because of no recent credit history, and some large medical bills that are 5 years old.  I keep reading online of lenders accepting credit like ours, but none list the names. Anyone know a lender that might take us on?
BTW- We really do not like taking on new debt like credit cards, which seems to be the only way to raise his credit. And, we want to let the medical bills fall off the credit report. Is there any other way to raise it?
  • October 01 2011 - Cedar Rapids
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Answers (8)

Profile picture for sunnyview
There is a link to get more information about NACA here that might be useful. 
  • October 02 2011
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Profile picture for stmido
Jason- I have never heard of this NACA, this is a local non profit charity that helps people for free as long as you are lower income, and they do consumer credit counseling.  They are in high demand because they actually help people, work with the creditors, and help with finding lenders.

Willie- thanks for the reply, we would much rather wait and do the credit repair with the non-profit than to pay someone our deposit money which has taken a while for us to save up, and we can use it if we need it when actually buying a house.

Norm- Are you saying FHA doesn't have private mortgage insurance, but you do pay mortgage insurance through FHA loan for five years?
  • October 02 2011
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March?  That's five months!  Your credit scores could be A LOT higher by then if you take action now to improve them.  I've taken clients from the low 500's into the 660-690 range in that amount of time.

And if you're referring to NACA as this "non-profit/free" service that you think is going to help you...do your homework.

The people participating in NACA's programs are called members, and they fall into three membership categories:

  1. Participating members are on the road to purchasing a home or exploring a refinance with NACA.
  2. Homeowner members have purchased or refinanced through the agency. These members are still entitled to counseling and assistance throughout the life of their NACA loan.
  3. Community members support the organization's mission and participate in advocacy efforts, although they may not own a home.

Membership comes with dues. Currently, participating members and community members pay $20 annually for services, while homeowner members pay $50 a month for five to 10 years. This fee is folded into the mortgage payment, and it funds the Membership Assistance Program, which is what homeowners turn to after the ink is dry on the mortgage. We'll talk more about this feature later, when we walk through the steps of buying a home with NACA.

To qualify for a NACA mortgage, you can't own any other property, so this isn't the way to your vacation home or a second property for rentals. You must also occupy the home for as long as you have the mortgage; NACA takes out a lien on the property as an enforcement measure. This reflects the organization's belief that people who own and occupy homes will have a greater stake in the success of their neighborhood and will lead the way in stabilizing lower-income neighborhoods.

Participation is one of the most unusual requirements of the NACA program. If you have bought a home before, chances are the last time you saw your mortgage broker was at the closing. Not so with NACA. Each year, members must complete five actions that further NACA's goals. These actions could include everything from stuffing envelopes to storming a shareholders meeting with the possibility of arrest.

  • October 02 2011
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Thanks for you correction from PMI to MMI and the addition of loan to value.  Can you simplify summarize for the non-mortgage professionals in the room?  My assumption is that there is not a down payment of 20% or better. 

Thanks again.

Stimido,
The GOOD news.  I do believe that you can seek a reputable credit repair company and repair the credit within 45 days.  This would allow to purchase also, it should be less than deposit for a rental.  I have contracted and had construction started on a new home for those with bigger credit issues.  That's right.  No approval, just the confidence in the credit repair company to fix the issues.  You can inbox me if you like.  I wish you luck. 

Willie
  • October 02 2011
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Profile picture for stmido
We have a meeting in March (they are high demand apparently) with a consumer credit councilor (non profit & free) to potentially get us where we need to be, and I will bring up the tips you all have suggested. So, in the meantime, no one knows a lender that will lend to us now? We are in a situation in which we have to move soon, and affordable rental houses are becoming hard to find in my area.
  • October 01 2011
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FHA requires 5 years of PMI.

The FHA, as a public (gov't) agency doesn't require or utilize PMI (Private Mortgage Insurance), it's the same as saying "the insurance company requires insurance".  FHA is the insurer and the insurance premium is MMI (Monthly Mortgage Insurance). MMI, on a 30 year loan will be required until the later event of 5 years or 78% LTV.

 
  • October 01 2011
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Awesome answer Mr. Hall.  Also, check with your financial institution about a "secured" credit card.  These work the same as a debit except they report to the bureaus as well.  You put the money that you are going to use in an account and just simply use the card. 

However, It sounds like you are really close.  A legitimate credit repair company can work on fixing your credit.  It should not cost you more than $400 to have your credit repaired to raise your score.  My guess is your score would be their within 45 days. 

And lastly, you will save money if you use the VA or USDA.  FHA requires 5 years of PMI.  The rate have been raised.  It could save you thousands over those 5 years ($90/mo).  I wish you luck. 
But pray your way through.  Your new home is right around the corner. 

Be Blessed.
  • October 01 2011
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stmido,

"BTW- We really do not like taking on new debt like credit cards, which seems to be the only way to raise his credit."

Opening credit cards is not taking on debt if you use them properly.  I assume that you use a debit card from your bank to make your everyday purchases?  Well, replace that with a couple credit cards and pay off your cards weekly or bi-weekly and keeping within your means.  Don't go over what you would have in your bank account.  This will build a credit rating.

Most people confuse credit with debt because they've been in trouble with using a credit card as "found money".  Use them wisely and over time the scores will increase.
  • October 01 2011
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