Sub- 600 score. 10-20% downpayment

[Mrzjbabii]

Hello I'm very new to this mortgage thing. I am 25 yrs old active duty military seperating in 6 months. My credit is in the toilet right now thanks to a paid judgement, paid tax lien, and a few collections. VA loan is out of the question as my husband and I have scores right around 520 to 540. My husband has already seperated from the Marines and will be recieving disability but right now the only income we have is mine which is about $4,800.  

My question is are there any lenders who out there who will finance a 100,000 loan with 10-20% downpayment?

[basballguy]

I don't know but it seems like the general consensus is it takes only a matter of months to raise your score to "reasonable" levels to qualify for a loan. 

I think 580 is the bare minimum and you have to jump through crazy hoops just to do that....including increased downpayment. 

But for comparision, I went from 522 to 660 in 6 months. 

[cim]

The best thing you could do is to contact several mortgage brokers to see if they can find a loan to fit your situation.  The good news is that a 20% downpayment will improve your chances.

[c06u]

I went through this last summer to no avail we made an offer of $185,000, and had $100,000 for a down payment Fico was around 570 at that time and I will tell you they beat the hell out of use over disputes to accounts we did not own at that time (before I learned not to dispute) anyway at that time I did not want to remove a dispute knowing I was right, and honestly thought a hefty down makes a diff, WELL it doesn't anymore, at one time it did but those days are long gone...bottom line was we were rejected for the loan....we have $0 balances on everything, we own our cars outright we own the home outright, never any BK never any repos $45,000 yr in secure pension but continue to get beat up by the banks! the America I was born into is long gone along with the solid banking principles of the pre 1990's

[Anonymous]

I would advise against using a broker. In a situation like this, you really want someone who can be hands on with the underwriter. Mortgage Brokers, sadly, have absolutely zero control over your loan process. There are good ones, and bad ones.. but zero of them have control.

The minimum score to qualify for conventional financing ( Fannie Mae, Freddie Mac ) is 620. You could qualify for FHA currently, but it is really a lot of red tape. You would be much better off getting to 620, putting 20% down and just doing conventional financing to avoid MI.

Inbox me if you have anymore questions. Best of luck!

[MovingForward_2012]

I am going to have to say it is a no go right now. Most lenders require at least 640 for FHA. Very few will do a 580 and it is becoming increasing difficult to find a lender that will do a 620. On June 1st, FHA loans will require manual underwriting and a recommendation from a LO/Broker for the loan if the score is below 620. I believe this new rule will curtail lenders even more from doing sub 620 loans. A 540 score is just too low, regardless of downpayment. I encourage you to visit the rebuilding section of myfico to determine how to GW those collections and get that judgement vacated. Most lenders also require 3-4 active trade lines so I encourage you to apply for a secured card for starters.

Due to the housing crisis, mortgage lending requirements are getting harder by the day. The government is trying to replenish the FHA account by raising PMI and credit score requirements to minimize risk of default.

[tooleman694]

I got my scores to mortgage levels from the 400s in a matter of months.

[HoldingOntoHope]

To the OP. If you can take the time to better your scores (and it doesn't take long in a lot of cases) then you will find that the VA loan will be very friendly for you. As long as you meet the minimum lender requirements for VA there is no interest rate penalty for not being 40-60 points higher in credit score and best of all no PMI with zero down. Understand that 0 down does not necessarily mean no closing costs out of pocket but the terms with VA are a lot friendlier than other lower credit score loans.

[Mrzjbabii]

I believe in the next two or three months I can raise my score up considerably by paying down my maxed out credit card and removing my state tax lien. The issue that I have with the VA loan is they require seperating active duty to have 12 months left on their contract or a job lined up to use their military pay ($5100 monthly!!!). I have neither as I will be a full-time student grad school student receiving only Post 9/11 housing allowance ( $1959 which is not "stable" income) and disability which I have not been rated for yet. My only hope is to raise my score to a 620 min and apply FHA. I heard and don't quote me on that,  that they do not require service members to prove time left in service  to use pay with LES and Tax returns.

[Elcid89]

There are a few lenders left out there who will do an FHA below 620, but the downpayment requirement is high.

Your bigger problem is going to be debt to income. Best suggestion is to rent cheaply, store money and let the baddies age off of your report a bit.