How Will I Afford a Mortgage With Bad Credit?
Jul 13, 2009 in
Financial and Loan Tips
Answer Girl 2007
Both my boyfriend and I have very, very bad credit. We have paid all of our debts off, but that still does not help our cause.
Both my boyfriend and I have very, very bad credit. We have paid all of our debts off, but that still does not help our cause.
We want to own a home and NOT rent.
How are we going to be able to get a mortgage w/ such bad credit. We do not want to be renters forever. We CAN afford a home, but we can’t get the loan.
Sorry, we are getting married. That’s why we are buying a home.
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11 comments
holland b on July 16, 2009 at 1:03 am
Sub-Prime lending?
You are about 6 months late
kate on July 16, 2009 at 1:18 am
Veryyy confused here ,
If you paid all your debts ,
How can you have bad credit ?
A huge part of the FICO score is debt to income and if you have no debt . . . ?
Only if there are charge offs and bankruptcies can it be less than good .
Either you wait until your score comes up with time
And the charge offs or bankruptcy are old history . . .
Then you can get a good rate .
OR , suck it up and pay the higher % they charge for bad credit mortgages .
Personally , I’d give it a couple of years (if what you say is true about having NO debt) .
It will save you an additional fortune in % charges .
In the meantime , save up the 20% down so you are not wasting $$$$$$$ on PMI .
>
curse08 on July 17, 2009 at 9:51 am
It’s hard to answer this question w/o more specifics. It’s good that you paid off all of your bad debt but I’m guessing all of your accounts are closed and you have nothing open that is any good. There are still loans out there that don’t require good credit or credit at all. I’m glad you took the initiative to pay off all your bad debts. that is going to help a lot. You are probably a year away from your most recent late payment or collection. FHA will be your best bet. it is not credit based. They look at the last 12 month history. As long as you don’t have any lates or collections in the past year you will be eligible. They do look for 3 or 4 12 month trade lines. A good 12 month rental history is a good one. Because I’m assuming you have no open trade lines you will need to either use alternative trades or open a few. Alternative trades are rent, utility bills, cell phone (not prepaid or cricket), insurance, gym membersip, etc. Anything you have been paying on for a year. They can use those as your tradeline. Make sure you were not late on any of those so when the lender asks for a 12 month payment hisory there are not 30 day lates all over it. That won’t help your cause. If you are renting make sure it’s with an actual complex. If it’s a private owner pay with a money order or check. Have a paper trail so if you are paying cash get a receipt. It’s also good to have a checking account. With FHA they are not looking for a lot of money but are looking to make sure you can handle your accounts so insufficiant funds or bounced checks is a major red flag. If you don’t have the alt trades you need to open some up. Get some signature loans to places that report to the credit bureaus like sunloans or world finance tax and loans. Secured credit cards work great as well. You are only a year away but it needs to be a clean year or you are going to have to start from scratch. NO MORE LATES OR COLLECTIONS FROM THIS POINT FORWARD. it’s time to be responsible. Hope this helps
Chris on July 19, 2009 at 12:15 pm
In this current market, each and ever loan scenario is on a case-by-case basis: even with less-than-perfect credit, you may still qualify for a mortgage that will work for you…..or you might not.
The only way to know for sure is to talk to a broker. If you are sure you have poor credit, I’d recommend a broker over a bank: banks are pretty strict on credit guidelines right now and a broker may have more options for you.
Talk to your friends and family and see if anyone you know used a broker they really liked. Don’t worry about the loan they got, just ask if your contacts used a broker who was great to deal with and had very open communication.
If you find someone you like and can trust, they will help you explore YOUR specific options. If they use a credit program similar to the one my company uses, they may even be able to help you make some short-term plans to raise your FICO. I had some clients who were able to raise their mid-score by 56 points, and it only took 6 weeks and cost them $250.
The important thing is that you find someone you trust, and have them help you step by step. Good luck!
MJ on July 21, 2009 at 10:47 am
Based upon your question, you must have just recently paid off your debts that were past due. Your credit score will increase over time. You do NOT mention if you have any active credit accounts? If you do not, you are not going to be able to increase your credit score much in a short period of time because nothing will be reporting. I would suggest that you get a secured credit card, if that’s the only one you can get at the moment. And make sure you pay if off timely!
Do you own a car or are you making car payments? Are these being reported? That shows installment debt.
Finally, if you can find someone who would possibly be willing to sell you property either as a contract for deed or under a lease purchase plan, and you can timely pay it for 12 months, you can obtain a mortgage through refinancing possibly.
Sometimes time is just what heals all wounds. People just don’t always understand that every action (failure to pay on time) can have a bad consequence in the future (tubing your credit score) But good luck! Sounds like you were doing the right thing to pay off your old debt. You should be fine in awhile.
just me on July 21, 2009 at 11:47 am
wait for a bit, let your credit score catch up with you. do things to increase it. (for example, i increased mine by financing some new tires & paying them off early).
next year, the housing market is supposed to be better for buying, i’ve heard. take the time to save up a down payment, maybe enough to buy some points. the link has some good info you may be interested in.
good luck!
ebay_singh on July 22, 2009 at 5:43 am
In todays mortgage market, it will be hard to find a affordable loan, Do this, restore hour credit score, Do not rush in buying a home, In most part of the country property values are declining, Let it stabalize while you are building your credit so you can get a good interest rate, In any case this is not a good time to buy, You will possibly end up being upside down meaning owing more thant what the property is worth. In that case you will not be able to sell the home if you have to.So I suggest just go and rent for now.
Rene S on July 22, 2009 at 10:09 pm
you can find a rent to own home. there are individuals that will work with you.
or if you can put a large deposit down it won’t matter if you have good credit . money talks.
there are some books out there that help you fix your credit.
ron P on July 23, 2009 at 9:16 am
Home loans are now available to many people for whom they would have been out of the question just a few years ago. You’d be in much better shape to bargain for better interest rates if you had a more impressive credit history, but if the house you want is the deal youinterest rates, get bigger returns on the money loaned, and the borrowers get a homes in which to build equity, and chances to restore their credit records so that the first bad credit home loans they take will also be the last!
sunburst2k on July 25, 2009 at 4:36 pm
There are some good answers here, read them all. There are some good credit repair agencies out there that can do some real good in helping you fix your credit report and build good credit. I’ve heard that creditjusticeservices.com is good but check any firm that you use at
Gary H on July 29, 2009 at 4:04 am
Don’t lose hope if you’re looking to buy a home. There are so many different ways to fund a home now, just about anyone with any kind of credit can get into a home, regardless of credit situation.
Of course, some will cost you more money in the long run, but a home it’s still one of the best investments that you can make, so, in many cases, it’s worth it, especially for the first year of ownership.
You should shop around, and ask different lenders what kind of programs they have, and if they can help. Try to find a lender that specializes in bad credit mortgages. You can find some bad credit mortgage lenders listed on this page on and off: