Help!!! Median score is 516! Can we get a loan to buy a home?

[Anonymous]

My husbands credit scores are 558.,516, and 470.  We have 4 kids w/a 5th on the way.  We just moved to Virginia and found a SUPER home in foreclosure that is huge and in great condition.  They're asking 69,900.00 for the home and we are wanting to see if it is possible to get a home loan and if so, through whom? 

We are desperate to provide a home for our kids but ignorant when it comes to a lender who'll work with us with low scores.  We both went through divorces which bombed our scores.  THANK YOU SO MUCH FOR YOUR HELP!!!!!

[Anonymous]

Generally you need 620 FICO to get a home loan right now.  If USDA is available in your area or if you want to try the NACA process you may be able to but for FHA 620 is abuot the minimum anyone will do.  What is dragging the scores down so much.  Are there any credit cards that couldbe paid down to under 9% usage?  Are there any medical collections that could be removed throguh HIPPA.  Are there any collections you could do a Pay For Delete on (PFD).  At 519 there are probably no mortgage options for you, but if you can get your scores up quickly then maybe.

[Anonymous]

My husband is a horrible diabetic on a pump w/health issues fo years so medical is prevalent.  I was also a single mom of 3 with no health insurance and didn't qualify for state medical help so I have medical on mine too due to health issues/surgery with my kids.  Through a divorce I have a repossession on my account and my husband through divorce has credit cards (3 I think) on his account that his ex never has done anything with.  He has tons of medical mainly. 

I am pregnant now and on bedrest so all we have is his income of 32,000.00 per year.  It is tight now with a family of soon to be 7 so paying things down to get them off may be impossible.  I am open to suggestions however!  Anything that will help I am willing to do or try!

[Anonymous]

Unfortunately it doesn't not look good.  If you are saying that you are unable to pay off any of these debts to get them deleted then I am assuming you do not have $ saved for a dwon payment as well.  I could be wrong.  For a 70K house you will probably need at least 5K cash on hand and it could be up as high as 7-8K depending on the loan program and if the owner/bank is willing to pay some costs.  Some are and some are not.  In the end, with low 500 FICO scores and no way to pay off some fo the old debt to get scores up, there is probably no way to move forward with a purchase.

Are there any negatives on your report for the last 2 years?

Do you haev insurance now?  Because anyone looking at your situation is goign to wonder if the pattern of large unpaid medical is going to continue?

When (or are) are you planning on returning to work after the pregnancy and will it be in the same line of work you were in  prior to the pregnancy.

Are there any other debts in either of yours names that have balances (credit cards/loans) and how mucha re the payments on them?

No matter what, this would be a hard sell and getting on the hook for a mortgage in your current financial situation may not be the best answer for you.  You need to see what can be done to either raise score and get some money put aside, or put aside thought of buying until you are in a position to do so.

[Anonymous]

By the way, not trying to be harsh, just realistic.  I wish you the best of luck in trying to figure it out.

[Anonymous]

There is nothing wrong with renting while you get your life and money figured out. Buying a house with bad fico scores (and high interest rate because of it) and no downpayment is just a recipe for disaster. What happens when first thing something major breaks down, like the furnace? In a rental, someone else pays to fix or replace it. I am assuming here that you have no emergency fund since your scores are so low and you have so much unpaid medical bills. How will you fix the furnace, or the refrigerator? Both necessary things.

I'm not meaning to sound mean, either, but honestly, please do not consider renting a place to live as being some kind of substandard choice. There is nothing wrong with renting. People buying homes when they can not afford to is what got the mortgage crisis going. There will be a lot of greedy loan officers and brokers out there to convince you how bad you need a house and how much you can afford. Listen, that is crap. Get your bills paid, get some money in the bank, and get those scores up. THEN apply for a mortgage. You want home ownership to be a blessing to your family, not a curse.

Good luck with everything and congrats on the coming baby. 

[MizzB]

+1

I totally agree that there is nothing wrong with renting. I know the low housing prices sound very appealing; however, homeownership is more than just paying the mortgage. It's paying everything else that comes along with it (like repairs).

I'm renting in a condo community that I thought I wanted to purchase a unit in (when I get my credit together). However, the roof started leaking yesterday and the a/c unit went bad two months ago. Had I been the owner, that would have been a lot of financial responsiblity that I'm not sure that I can handle. Do you have a plan for those types of things?

P.S. I see that someone mentioned USDA ablove and I've attached the link to the USDA underwitting guidelines below. Hopefully that will help if you are considering going forward with that type of loan. Good Luck!

USDA: http://www.rurdev.usda.gov/CA/pdf%20files%20and%20documents/GRH%20UNDERWRITING%20GUIDEL.pdf 

[MattH]

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@MizzB wrote:
...

I totally agree that there is nothing wrong with renting. I know the low housing prices sound very appealing; however, homeownership is more than just paying the mortgage. It's paying everything else that comes along with it (like repairs).

I'm renting in a condo community that I thought I wanted to purchase a unit in (when I get my credit together). However, the roof started leaking yesterday and the a/c unit went bad two months ago. Had I been the owner, that would have been a lot of financial responsiblity that I'm not sure that I can handle. Do you have a plan for those types of things?

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My wife and I have owned a condo since 2002, and in that time have had to come up with dollars on short notice for various things including:

• New A/C compressor
• New Hot Water Heater
• New Toilets
• New Dishwasher
• New Stove
• Special Assessments from the Homeowner's Association to cover major repairs to the building (such as the roof)

Many people make the mistake of comparing the monthly rent to the monthly payment on a mortgage, but with a rental the rent (and possibly utilities) covers everything.  When my plumbing has a problem now, there isn't any super to call so I must either fix it myself or hire a plumber myself.

If Original Poster cannot pay off debts then how can he or she handle the surprises inherent in ownership?  Also, underwriters look at more than just the scores, they also typically require outstanding debts be paid as a condition of getting the loan.

If OP has not spoken with a trustworthy financial advisor, I would strongly urge such a conversation take place in the near future.