What should you do before buying a house?

Anonymous · ‎07-03-2007

I really had it with my landlord. My lease will be up in November. I have been focusing on improving my credit with the hope of buying a house in May next year. But after today I plan to speed the process up. My credit scores are 542 552 and 585. I have several disputes pending, but everything is paid off except one that I plan to get a PFD for. I also have a couple lates that may or may not get taken care of. My plan is to have all scores over 600 by the end of august. My wife has slightly better credit with all three around 600. Is it possible to get a sub prime loan with a score below 600? Any thoughts? I am leaning toward a high interest loan first, then settling for a refinance at a prime rate later.

Anonymous · ‎07-03-2007

I just saw a post this morning from someone who got a home loan between 549-579 FICO. You may also want to try VA/FHA government loans they often help with down payment and also require less down.

Anonymous · ‎07-03-2007

You can likely get a subprime loan, but the rates might be a killer. Broker I talked with back in March/April said the scores he pulled were low 600s on me, mid 600s on my wife, and those were a lot closed to our TC FAKOs than our FICOs. But mortgage lenders often use their own tweaked scoring mechanism.

He was talking a 9% loan, and I understand now one can probably expect paying even more.

I'm in the same boat as you. Renting and I just want out.

If your wife's scores are better than yours--same as me--I understand there are mortgage products that look at all 6 scores (your 3 and her 3). They either take a median or a mean of all 6.

PM me and I can give you the contact info of a broker who knows the mortgage and credit rackets very well. He's helped a lotta folks. Even when he couldn't get 'em in a mortgage, he's given out a lot of good advice on how to improve your situation.

Anonymous · ‎07-03-2007

Thank you I just PMed you. I expect my rate to be higher. I was hoping about 8% or less. To get away from this, I will settle for a lower priced home then move to a better house in a couple years.

chartley3 · ‎07-03-2007

Actually if your a first time homebuyer you should easily qualify for Fannie Mae with 10% down at a rate around 8%. Only catch is you need to make sure you have less then 4k in unpaid collections. If you can get your mid score around 620-640 you should be able to walk into a real bank and get a mortgage providing all collections are paid and no lates are on your report from the past 2 years. Remember in most cases your going to need between 5-15% down depending on the program.

Anonymous · ‎07-03-2007

chartley3 wrote:
Actually if your a first time homebuyer you should easily qualify for Fannie Mae with 10% down at a rate around 8%.

With starter homes in the $450K range, 10% down ain't in my future.

Anonymous · ‎07-03-2007

I got into my house with a score around 550 with about 5% down and got a rate of 7.25% but the PMI is the killer... over $400/month! If you can get a VA loan DO IT. I'm about to refi this mofo and get rid of that PMI

Anonymous · ‎07-03-2007

That's right. With the subprime market collapsing, by fall all mortgage lenders will have tightened restrictions on mortgages. A seminar I went to last month regarding cleaning up your credit in order to buy a house said: (a) pay off all judgments and tax liens; (b) pay off collections (may be able to negotiate this with lender); (c) have at least 10%-12% of the purchase price of the house saved up for downpayment and closing costs because lenders don't want to see you empty your savings account just for the downpayment; and (d) make sure you can document your income. Face it, with foreclosures up sky high and subprime mortgages defaulting at close to 20%, there is no easy way to get into a house for those of us with bad credit. (Fannie Mae doesn't use credit scores, but they won't accept any judgments or want collections paid off.)

The good news is that mortgage lenders consider 585-620 to be salvageable -- you won't get an automatic turn down although you may be asked to fix your credit. Anything over 630 is doable, with the proper documentation of income.

PS: An upside of this crisis in housing is that housing prices should be dropping like flies within the next year for those who can hold out till 2008.

Message Edited by hopeful on 07-03-2007 12:35 PM

Anonymous · ‎07-03-2007

alkizz wrote:
I got into my house with a score around 550 with about 5% down and got a rate of 7.25% but the PMI is the killer... over $400/month! If you can get a VA loan DO IT. I'm about to refi this mofo and get rid of that PMI

PMI is deductible as of 2007.

Anonymous · ‎07-03-2007

If you make less than $100k/year. Even if not it still sucks to spend an extra $5k/year on your house payment