Profile picture for dreindenver

Need advice about obtaining a home loan

I was told by BOA of today that a short sale is the same thing as a foreclosure and that I would have to wait for 3 years before I could purchase another home. It has been just over 2 years since my short sale and I was hoping to purchase a smaller home for my son and I. I am so disappointed. I have worked hard these last two years to pay down my debts and I just really wanted to take advantage of the current market and get a small home. Purchasing here in CO is a lot less than renting. Renting a 2 bedroom would cost between 800-1000 a month and I know I could purchase a home for less than that. My credit score is in the low 600's and I know I could get an FHA loan. Any advice would be greatly appreciated.
  • November 27 2010 - Barnum
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Answers (7)

I am a lender and I do loans for 580+ fico score borrowers.  There are lenders that do not have the overlays and allow for borrowers to purchase a home.  Irregardless of your short sale / foreclosure issue you may qualify.  It is of course a process.  I would really recommend that you do not touch anything on your credit report without getting some expert advice.  Lately, I have had quite a few borrowers that have tried to repair their credit only to find out that they #1 lowered their score and #2 spent money needlessly.  I really want to get the word out not to attempt credit repair without assistance.  The credit repair companies can be a wonderful resource if you are looking to fix your credit in about 6 months or more however if you need a "rapid" fix always talk to a qualified lender in this area.  I know I offer it as a free service with a loan. 
Sincerely,
Celia
  • November 28 2010
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Profile picture for David Widlund
I still get email marketing from a couple of lenders who will do an FHA loan for a 580 score but all of the big lenders/banks require a 620 or 640. I usually get on my soapbox with these topics because I believe that people believe they have a right to own a home, or get a mortgage regardless of what has happened to them in the past. Please know that this is meant for others who may read this post, not necessarily for the original poster. Credit scores are earned. If yours is bad, it's because you have handled credit poorly. I have had a poor credit score before myself. And I promise it was because of my behavior with credit and not because "the man" was trying to hold me down. You are what your score says you are. If you are that recently in major credit trouble, maybe it would make sense to develop a long period of solid credit usage. Build your reserves, pay off any debt and you will know when you can buy without fear that a financial setback due to health, divorce or job loss will keep you from making your payments on time. If you can't afford to rent, you definitely can't afford to buy. This advice is not intended to be judgmental or mean-spirited. It is meant to give people a point of view which they may not have considered. The biggest reason for the recession we are in right now is because of the foreclosure crisis and much-too-easy credit. When the time is right, you will not have to worry about any lender telling you no. Good luck.
  • November 28 2010
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A short sale is looked at by a lender in a VERY similar fashion as a foreclosure.  Looking at the basics, in both a short sale and foreclosure payments are not being made on time on one of your biggest credit advantages (a long term installment loan/mortgage). 

Also, please be aware that even though FHA itself allows a credit score of the high fives to low 600's, lenders can not resell these loans and usually won't do a loan with a credit score of under 640 (this has just occurred very recently).

The best thing you can do for yourself is ask around to trusted friends and co-workers for a mortgage broker that they trust and ask that mortgage broker if they are well versed in FHA loans.  If not, keep looking, if so, then have them pull your credit and walk thru it with you to see what you need to do to be able to buy in this great market.  I have several as we do mostly FHA clients that I turn to in time of need for my clients. 

Also, please be aware that a home in Colorado in most areas will be a total PITI/MI payment will be 980-1400.  There are some areas that will have BEAUTIFUL homes for less than that, but not many.  You need a home that is in good enough condition to be allowed FHA financing and even though small, you need clean. 

An $800 payment is a home selling in the range of 90-110 depending on taxes and that is VERY rare in most of the Denver Metro area.  You need to get to outlying areas for that low of a payment.  Anybody telling you different is NOT telling you the whole truth.
  • November 28 2010
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A short sale is NOT the same thing as a foreclosure.  Indeed it does negatively affect your credit, but not in the exact same fashion as a foreclosure.  You made a wise decision 2 years ago to sell as a short sale.  Do not regret that decision.

Unfortunately, it does take time to recover, though it will not take as much time as a foreclosure.  Additionally, foreclosures leave other 'blacker' marks on your credit.

Take the advice from the others here... and speak with a local lender who can look at your credit report and advise you.  I would suspect that there are other mitigating factors that are putting home ownership out of reach at this time.

People say that 580 is the minimum for FHA... most others lean towards 620.  But that does not mean that if you have either one of those scores that you will automatically qualify.  There are many other factors involved.

Get good, local advice and work just a little longer on your credit.  In a short time, you will soon own another home.
  • November 27 2010
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Profile picture for David Widlund
Without knowing more details, I cannot say for sure that you will qualify, bit the short sale shouldnt preclude you from purchasing, except for using the lender you did the short sale with. But you probably have some other negative marks from when you gave up your house that don't go away overnight. Talk with a local broker/lender who specializes in credit improvement. They will give you a more thorough answer or a roadmap to get back to owning a home quickly. Good luck
  • November 27 2010
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I would talk with a local mortgage banker, not a big bank like BoA.  The length of time before you can buy again depends on what mortgage program you decide to use.  I can refer you to both a trusted credit counselor and several local mortgage bankers who will review your specific circumstances and can help you move on from there.  You can reach me at aavail@kw.com.  I work in the Denver metro market.
  • November 27 2010
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Talk to another Loan Officer. There are many here on Zillow that will be happy to get you back on track. 1st off though, if you score is in the low 600's you may want to contact a credit clearing company. You score will need to be higher to qualify for most loans including an FHA loan. Here in my area I recommend to my clients to contact Dedicated Credit Repair. Google the name and I am sure you will find them.
  • November 27 2010
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