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Profile picture for hathathat

My husband's credit rate is low at about 611 and mine is 677. Can we buy a property?

Our income is steady and good. We make about 200000. We are thinking of selling our current property because the mortgage is too high and we have revolving debt of $65000 our bank refused to consolidate. Our current property has been estimated for  $895000 and we're thinking of downsizing. Can we buy a property with a high debt to income ratio and not so good credit score? We have not defaulted anywhere. What can we buy in terms of prices? Or should we rent for a while?
  • June 17 2010 - Town Center
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Answers (7)

Profile picture for moem
  • moem
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I am not in the business and therefore will not ask you to call me.  (-:
However, my credit union was HUGELY more receptive to my 680 and I was offered the lower rates with that score & 25% down...  I've generally found credit unions to be slightly higher (now 4.75) but more human with consideration of the big picture.
  • June 17 2010
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I suggest speaking with a real estate agent and a lender that work together to come up with a viable strategy to pay off your debt, improve your credit, get you into a rental or lower price home, and come up with a plan so you are not stuck renting for too long.

I would at the minimum talk to a lender who can look over your entire financial picture to ensure that you would be in a position to buy in the future if you were to sell now.  There may even be a way to structure a purchase with just you on the loan, depending on your income, and how much you will realistically net from a sale.
  • June 17 2010
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Home Equity loans typically have even more stringent standards than first trust loans, Wayne, unless you know something most other lenders do not????

  • June 17 2010
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It is fortunate you appear to have viable options.  A  611 credit score is a big negative when seeking financing, however if you were able to get a home equity loan and paid down/off revolving debt your scores would likely improve. It may mean staying in the house would be a good option if your cash flow improved significantly. I am not in the home equity side of lending (our bank does in TX) nor am I familiar with loan to value home equity limits in your area. Talking with a credit union or bank(s) in your area (not the one you talked with) should provide those guidelines. You could approach them on basis that the funds could be applied directly by them to pay off debt, which would improve your credit scores typically and improve your debt to income significantly. Strong employment and high income should help.
There are credit analyzers that perform "what if" scenario's that would give you a good idea of how or if your scores would improve by paying down/off revolving credit. The lender that provided your current financing should be able to help you with that option. If you need a local lender referral let me know, as there are good one's on Zillow. If that does not pan out, I would suggest talking with a local Realtor and review your selling,/renting options. Your current cash flow sounds precarious.
  • June 17 2010
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Profile picture for hathathat
Upon selling my home I should be able to net about $150000. My mortgage is $675,000 and my home has been appraised for $895000. I know that in this market though sellers don't always get what their homes have been appraised for. Also, there is the agent fees and closing costs to consider.
Another thing I worry is whether by renting I would be priced out of the market on a year or two. Of course if we rented we would be able to pay  our debts much faster because we could find a decent rental hopefully for $2500. Right now we pay $4850. The bumper is all we want is to pay up $65000 in revolving debts and the bank did not give us a consolidation equity loan because of all these issues. Furthermore, we have to stay in the DC area because this is where my husband and I work. Any suggestions?
  • June 17 2010
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Hathathat,

The greatest benefit of purchasing now is the low interest rate. However, with your somewhat low credit scores, it will be hard, if not impossible, to take advantage of the low interest rates available now.
 
Whether it is better to sell your property, rent for a few months which would give you an opportunity to improve your credit, and then purchase your next home DEPENDS if you are underwater on your current mortgage. You say in your post that you are current on your mortgage payments, but you did not state if you would be able to pay off your mortgage upon the sale of your home.

If you are underwater on your mortgage and you decide to sell first, you have two options: 1) bring money to the settlement table  2) hope that you qualify for a short sale and your lender forgives the "short" amount. Not every borrower qualifies for a short sale.

If the lender approves a short sale, you will NOT be able to purchase for at least 2-5 years as the short sale will lower your credit score even more.

I practice real estate in Northern Virginia and would be happy to meet with you to discuss the details.

NOTE: For a legal advice and tax advice always contact experts in those fields.
  
  • June 17 2010
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hi hathathat, there are many other factors a lender considers before you could be given a definitive answer. Certainly, your choices of loan programs at 611 are a bit less than at 677, in general. However, if you are able to sell your present property, if you can put a good percentage down, lenders would look at that as a good thing. Also, in general, the lower your debt to income, the better. I wish you good luck in your decisions coming up, and I hope these comments help! Jim
  • June 17 2010
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