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I recently read the post "580 or less club" and have a question similar to that reader. My husband and I are trying to purchase a HUD home. We have never owned a home before. We have $8000 saved for down payment, after which we will have approximately 10 months mortgage in reserve after closing. We are two years discharged on a bankruptcy due to medical bills and being overextended on our rental payments. I have been paying $700/month for rent for the past 5 years while being a full-time student and working only during the summer months. I have researched the entire process and waited and prayed to make sure I wasn't rushing in. I pay my own utilities in my apartment which total 1.5 times my rent. So During the winter months I sometimes get behind, but ALWAYS ALWAYS bring it current in the summer. Recently my husband was awarded his social security payments, which we have been waiting 8 years for. This gives us documented, steady income now which according to all calculations, the mortgage will be approximately 33% of his income. His median score is 600 and mine is somewhere around 525. Why are we having such a hard time getting a lender or even a realtor to work with us on this one? I know its a tough situation, but definitely not an impossible one.
Signed,
Looking for a yes man!
a couple notes.
they may well require ss income to mature before they accept that. They usually want 2 years of steady doucmented income. I am not sure how tha works with ss.
33% debt for housing is higher than the standard which is usually 31% Max
Any lates post BK (especially just 2 years out of BK) is a hurdle that is very hard to get over
Scores generally need to be 620 or more.
You can still get loans under 620, but you have to have a really strong file. In this case, it does not appear that you do. No offense meant, but in this market a lender is not going to loan to someone who is 2 years out of BK, has DTI higher than the standard max, admittedly gets behind on bills during some months, has low FICO scores, and does not have a steady stream of income going back 24 months. You will probably need to be able to show 12 months with zero lates, 620 FICO scores, and have some established income history to get an approval.
Having the reserves does help, but it would probably not counter all the negative items as far as getting an approval goes. Again, no offense, just being honest.
so to kind of answer the question, if you are trying to buy a house now, it is probably not possible. If you want advice on how to prepare to buy a house in the future then:
make all bill payments on time for 12 months and keep very good records (bills and receipts) this includes utilities. Make sure the utilities are in the name fo whoever is going to be on the loan so they can count them as non-standard credit references.
Open up a secured credit card and use it very wisely (always pay it down to less than 10% utilization every month.
Keep saving what you can to get more down payment and reserves.
We are finally homeowners!!
Closed May 5th-30 yr fixed at 5.25%.