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1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

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Anonymous
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1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

I'm looking to be a first time home buyer and currently have an income of $70k in a metro area where this is above average for an individual, probably on-par with median household in some areas and below in others. I've had very negative experiences renting so am eager to finally buy a home. My weak points are my credit score (more about this below) and the fact that I've only had a good income for about a year, but before this I was a student. I work in an in-demand technology field so I'm confident of being able to continue employment and buying a home would actually cut my monthly housing payments in half.

 

Basically, a loan officer I talked with told me the lowest total closing / down payment + fees I could do would be around $7,000 for $100,000. This is through the First Time Homeowner program and I realize its lower than what people would normally get but I feel an FHA loan is the only realistic option for me at this point. In the metro I live in, the housing crisis has hit hard to I can probabaly find something I would be happy with for less than that, as low as say $70,000.

 

Regarding my credit, I currently have poor utilization rates but my available credit is only about $10,000, except, I am authorized on parents' account from when a fulltime student, so I am having this removed (its a large balance $33,000 out of $37,000, so am hoping this would help a lot as its not actually my debt at all and IMO should never have been on my report). Other than that, I have 2 small collections, each around $200 and aged at least a few years ( 1 medical that I can't remember having an appt for, 1 nonsense that the coll agency can't even tell me what its for). I am actively fighting these as they have not provided any proof that I owe the debt (just got serious about my credit within the last couple months).

 

Basically, I'm wondering if anyone can give advice such as if I need to pay down my credit cards to get my util rate down (which takes away saving money to reach that $7,000 I need) or consider other options, such as lowering the amount of the loan? Also, I wonder if there are any legitimate ways to get my utilization rate down, such as should I try for a balance transfer to spread the CC debt out? Is there any other type of loan I can realistically obtain being young (no life insurance / 401k to borrow against), only real asset is car valued around $7k that I own outright, so that I can pay down my CC debt?

 

I would appreciate any advice, I have consulted older people I know, etc, but not sure they are the most credit savvy people based on their answers ("I should just pick one CC and pay it off, etc..") and the loan officer obviously wanted to sell me the highest loan possible as once I mentioned $100k it was hard to get her to even listen when I said I would consider a lower loan. Also, she said doing a secured savings loan would be good but frankly that sounds like a bit of a scam to me as I am just basically paying interest on my own savings. Thanks for any advice.

Message 1 of 7
6 REPLIES 6
getnthere
Valued Member

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

You are on the right track: you definitely want to fight any inaccurate information on your credit report and paying down your CC's is a very good idea.  Actually, I think that is the best thing to focus on right now, because if you are already in the mid-600 with high utilization (which is a major factor in your score), paying down your revolving debt to (at least)less than 10% would give you a pretty big score jump.  And the higher your score, the more flexible lenders become, especially with that much income.  It becomes harder for them to let you walk away, so even with a low down payment, you might be able to get what you want.

 

 

.....Unless you are(or have been) in the military, then a VA loan would be your best bet, since there is no downpayment required to get the best interest rates there.



Impossible is only impossible at the end of time, when you can no longer do anything.
Message 2 of 7
Anonymous
Not applicable

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

Regarding paying down your credit cards...if you are trying to help your credit score you want to use 30% or less of your available balance.  Once you hit the 30% mark that will maximize your score and do the same for all your credit cards.  Make sure though you do not use up all your savings though as you are going to need probably 3.5% down on an FHA loan.  

 

If I were in your shoes I would check out the programs offered by your local housing finance agency.  I would also take a homebuyer education course from your local hud approved housing counselor.   You should also check with your local city or county housing agency to see if you qualify for any of their down payment assistance programs or other special programs for first-time homebuyers.  The lenders who are affiliated with your local housing finance agency are probably some of the best loan officers for first-time homebuyers so ask your state who the top producers are and interview a few of them.

 

You also might want to consider asking your parents to cosign an FHA loan for you if you are not able to get a home loan on your own.

 

Good luck!

 

Welcome to the Forums, FirstHomeAdvisor.  Your post has been edited to remove advertising, per our Terms of Service.

Message 3 of 7
ShanetheMortgageMan
Super Contributor

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

Scores in the mid-600's (i.e. 650's) should be OK to qualify for FHA financing, it doesn't sound like anything you've been told indicated you couldn't qualify for FHA financing - did I misunderstand? 

 

If you are looking for help to reduce the amount of money you need to bring in at closing then you may want to look into down payment assistance but at $70k/year for 1 person your income may be too high to be eligible for them.  Your name is "azguy" so I figure you are in Arizona - this link will apply to you then http://www.communityhousingresources.org/downpayment.php

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 7
xazilizax
New Contributor

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score


@ShanetheMortgageMan wrote:

Scores in the mid-600's (i.e. 650's) should be OK to qualify for FHA financing, it doesn't sound like anything you've been told indicated you couldn't qualify for FHA financing - did I misunderstand? 

 

If you are looking for help to reduce the amount of money you need to bring in at closing then you may want to look into down payment assistance but at $70k/year for 1 person your income may be too high to be eligible for them.  Your name is "azguy" so I figure you are in Arizona - this link will apply to you then http://www.communityhousingresources.org/downpayment.php


Shane, do you have a link for down payment assistance in Georgia?

Message 5 of 7
Scope27
Regular Contributor

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

Have you considered checking if you are eligible for a USDA loan.
Message 6 of 7
ShanetheMortgageMan
Super Contributor

Re: 1st time home buyer, looking for low down payment loan, dealing with mid 600 credit score

xazilizax - the big one in Georgia is http://www.dca.ga.gov/housing/Homeownership/programs/GeorgiaDream.asp

 

altonc27 - the OP said they were in a "metro" area, so they may not be in an area eligible for USDA.  But you are right, they may.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 7 of 7
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