Bad Credit and buying a house

  1. OK Dh and i have bad credit. We are TRYING to clean it up but is very slow going with only one income right now. Has anyone here bought a house with bad credit? How hard was it? I mean everyone says now you can get financed easily, but i'm paranoid to even try ya know? We got approved to buy another car but decided to wait until we decided on whether or not to pursue buying a house first. Any thoughts??
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  2. 30 Comments

  3. by   memphispanda
    If you have bad credit, you will have to go through a B or C lender. Yuor interest rate will be high. Your payments will be higher because of the high interest. You may also have to go with a second rate homeowner's insurance with high rates and lower coverage because they also consider your credit.

    The better thing to do would be to get your credit in order, then try getting a house. 3 years of no slow payments usually is what it takes to get you a decent interest rate.
  4. by   Sheri257
    Actually, I know a bit about this. Used for work for a mortgage lender. Yes, you can buy a house with bad credit, and it will cost you. But first, you need to check on a couple of things.

    Even if you have a foreclosure or bankruptcy, you can still get a mortgage. BUT, you pretty much have to establish clean credit for two years. Have you established good credit with no late payments or deliquent accounts in the last two years? Because that's going to help you a lot if you have.

    :spin:
    Last edit by Sheri257 on Apr 25, '04
  5. by   SnowymtnRN
    Quote from memphispanda
    If you have bad credit, you will have to go through a B or C lender. Yuor interest rate will be high. Your payments will be higher because of the high interest. You may also have to go with a second rate homeowner's insurance with high rates and lower coverage because they also consider your credit.

    The better thing to do would be to get your credit in order, then try getting a house. 3 years of no slow payments usually is what it takes to get you a decent interest rate.
    This is what i'm confused about. Yes i figured the interest rate would be high. But isn't it better to get a mortgage with a higher interest rate, pay consistently and well for a few years, then redo the loan for a better interest rate? All this as opposed to the near $1000 a month i'm paying in rent?
  6. by   SnowymtnRN
    Quote from lizz
    Actually, I know a bit about this. Used for work for a mortgage lender. Yes, you can buy a house with bad credit, and it will cost you. But first, you need to check on a couple of things.

    Even if you have a foreclosure or bankruptcy, you can still get a mortgage. BUT, you pretty much have to establish clean credit for two years. Have you established good credit with no late payments or deliquent accounts in the last two years? Because that's going to help you a lot if you have.

    :spin:
    OK we've in the last year bought a minivan, and have never made late payments on it. BUT there are 2 debts that i have recently found out will be on our credit. One is a cell phone bill that is hyper inflated (we owed $400, they say $1600 whatever) but i just sent a certified letter to try to settle it for the amount owed. The other is our old residence, we left our apartment and gave 42 days notice due to my DH's employment. We had to move out of state for his job, and gave notice but they require 60 days notice. So they want basically $1400 (one month's rent) to clear our debt. I'm sending them a letter to offer to settle it. The rest of our credit is old credit card debt and other minor things. No bankruptcy or anything, a paid judgement (medical bills believe it or not while we were in RN school) and that's it i think. I need to order our credit report to really KNOW everything on it. Any thoughts?
  7. by   memphispanda
    If you could get a decent house, and come out at $1000/month total payment--including your insurance and taxes--then you'd be doing ok to go on and buy. However you would also be cheating yourself a bit...say your payment is $1000 and that is all you can afford right now. In three years you refinance, find a new homeowners insurer, and your payment decreases to $800. Suddenly you can afford a nicer house, and you really haven't put much money into the house you already have because of the high interest rate.

    Anyway, I don't know if it's easy to get financed or not. I used to be a mortgage credit reporter, and we put in a ton of work on those less than perfect applications. Some of them would take months and months.

    It's really all in what's available to you.
  8. by   elkpark
    You definitely need a current copy of your credit report.
  9. by   Jailhouse RN
    Your bills and credit Hx are YOUR business not ours. What does this have to do with NURSING?
  10. by   heart queen
    Quote from Jailhouse RN
    Your bills and credit Hx are YOUR business not ours. What does this have to do with NURSING?
    Ouch! Sorry, I've used the break room for off topic posts. Sorry if it offends, but I love the variety of responses I get from this great diverse group... so I'll bite.

    Hub and I did the evil of all evils... foreclosed on a house. Not due to an inability to pay, Neighborhood became so unsafe we couldn't sell and the value plumeted more than we owed.. the bank wouldn't give a loan to cover the difference... which was crazy because our loan of $40,ooo was recovered at $5,ooo. when HUD sold it... the bank lost it all.

    All our other credit was good. We waited two years, had a GREAT lawyer, then put 20% down. We basically rented a nice duplex, saved the 20% and bought again. Interest rate WAS higher 8%, where 7% the norm, then after two years it floated to 11%. By then our credit was excellent, we refinanced for 16oo$, and locked in 6%, saving a crap load of money.

    Plus, when owning and paying intrest, it is tax deductable in April. When we rented it went in someone elses pocket.

    From MY experience it payed to pay a higher percent due to tax deductable, closing cost and moving write offs. BUT we figured out ALL the figures first before forking over $23,000. for deposit.

    Good luck, it can be done... just spend the time to look at every angle and add each up on paper, the time spent is worth it!
  11. by   Sheri257
    Quote from SnowymtnRN
    OK we've in the last year bought a minivan, and have never made late payments on it. BUT there are 2 debts that i have recently found out will be on our credit. One is a cell phone bill that is hyper inflated (we owed $400, they say $1600 whatever) but i just sent a certified letter to try to settle it for the amount owed. The other is our old residence, we left our apartment and gave 42 days notice due to my DH's employment. We had to move out of state for his job, and gave notice but they require 60 days notice. So they want basically $1400 (one month's rent) to clear our debt. I'm sending them a letter to offer to settle it. The rest of our credit is old credit card debt and other minor things. No bankruptcy or anything, a paid judgement (medical bills believe it or not while we were in RN school) and that's it i think. I need to order our credit report to really KNOW everything on it. Any thoughts?
    Well, you might be OK. You definitely need to get the credit report and see if these items are on the report. If they are, the good news is that it's easier to dispute items like the cell phone bill and landlord debt since they're collections. BUT, easier doesn't mean easy. It still takes some work and time.

    You can either negotiate with the collection agency or debtor to remove the report as part of any settlement you can work out. If that fails, you can also dispute the item with the three credit bureaus. Basically you contest the debt through letters (or online), they investigate, and you can sometimes remove it that way. Usually if you dispute collections, persistance pays off. If you don't remove it the first time, don't give up. Keep writing letters to both the collection agency and the credit bureaus contesting the item.

    Generally, if your credit report shows no deliquencies for two years, and if your credit score is 620, you can qualify for a mortage. If your credit score is lower than 620, then you're looking at higher interest rate deals or, perhaps, government guaranteed loans like VA, FHA, etc. if you qualify for those.

    I suggest obtaining your credit report right away and working on removing the items you think you can dispute. Then start shopping for a mortage broker who can give you lots of options. Preferably someone reputable who works on loans for bad credit borrowers. Although definitely shop around. Don't just rely on one mortage broker.

    On the other hand, if you do shop around, don't let too many brokers run your credit until you know for sure which one you want to work with. Too many credit inquiries can also hurt your credit score.

    The good news is that you don't have a foreclosure or bankruptcy, and that's half the battle right there. And, as previously mentioned, if you can make a 20 percent down payment, that helps a lot as well. But most people don't have the cash for that.

    :spin:
    Last edit by Sheri257 on Apr 26, '04
  12. by   Sheri257
    Quote from memphispanda
    If you could get a decent house, and come out at $1000/month total payment--including your insurance and taxes--then you'd be doing ok to go on and buy. However you would also be cheating yourself a bit...say your payment is $1000 and that is all you can afford right now. In three years you refinance, find a new homeowners insurer, and your payment decreases to $800. Suddenly you can afford a nicer house, and you really haven't put much money into the house you already have because of the high interest rate.
    I wouldn't count on refinancing at a lower interest rate in three years, unless you're talking about an 80/20 mortgage where some of the debt is as high as, let's say, 11 percent or more.

    Don't forget that the Federal Reserve is talking about raising interest rates since the economy is doing better. These low mortage rates may not last for long. So if she does end up doing a higher interest rate deal, she may not have great refinancing options down the line.

    :uhoh21:
    Last edit by Sheri257 on Apr 26, '04
  13. by   SnowymtnRN
    Quote from Jailhouse RN
    Your bills and credit Hx are YOUR business not ours. What does this have to do with NURSING?
    WOW that was RUDE and HARSH don't ya think? Its the BREAK ROOM and this is the resting place for fun stuff and OT advice. I've been here a LONG time and i feel comfortable posting these things to ask for advice from others who have experience or advice to offer. Don't like it, don't read it. Nobody asked your opinion.
  14. by   gij1
    We talk about all sorts of topics on this board. Have you not noticed. I was glad to see this topic regarding buying a house. I was totally interested in hearing the advice given. Jeez if all we talked about was nursing, that might get a bit boring.

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