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isn’t the best in the world? I need to know what can I do because living in the city is very expensive!! If I can pay 700 a month just renting then I might as well buy a home paying these kinds of monthly payments for a house that will never be mine.

5 Thoughts on What do I need to do to buy a house when my credit?
  1. Reply
    Paul in San Diego
    January 13, 2013 at 6:59 am

    At $ 700 a month, you would only be able to afford about a $ 60K mortgage. And, this would be for a loan where you came up with at least 20% down, and not much more than a $ 80K total price, when you factor in property taxes. If you didn’t come up with at least 20% down, you would be looking at paying additional money each month for private mortgage insurance (PMI).

    At that price, you’re probably looking at a condo, so you can add another $ 200 in HOA dues. That brings you right about up to $ 700 a month, total.

  2. Reply
    Ŀëммϊ ;) ωϊηκﯤ
    January 13, 2013 at 7:28 am

    There are some good government loan programs available. The limits keep changing 🙂 but right now with all government programs, the minimum FICO score is 620. You could try to apply for an FHA loan (or perhaps a USDA Rural Development loan if you live in a rural area.) Most non-government conventional loan programs are requiring a 720 minimum FICO score now, but you may be able to hook up with a lender who is doing 680 min. FICO still. I would contact some mortgage brokers in your area to see what their lenders are requiring.

  3. Reply
    January 13, 2013 at 7:53 am

    There are four main areas of your finances that banks look at: Credit Score, Loan-to-Value (i.e. how much you have to put forth as a down payment), Debt-To-Income Ratio (i.e. what is your monthly income as compared to your monthly obligations), and Assets/Reserves. If one of these areas of your scenario is weak, sometimes the others can offset it as “compensating factors”. You should seek out further, specific advice from an industry professional because this is an oversimplification, and the industry is ever-changing. Usually, mortgage brokers do no-obligation consultations to discuss your objective and to go through the numbers and cost/benefits.

    Good Luck!

  4. Reply
    January 13, 2013 at 8:34 am

    Yes, of course you could buy a house for the amount you pay in rent. Make it possible by improving your credit rating (pay off credit cards or other loans, pay your utilities on time, arrange a small catalogue or other loan and pay it off, preferably ahead of time) and at the same time cut your spending to the bone and increase your savings. For any house purchase you are going to need a deposit of at least 10%, and it is wise to have an emergency fund too.

    Set yourself a target to have saved by, say, the end of the year. Get your loans clear by then, and that will leave all the repayment money to give your savings an extra boost. Then start looking to see what is available out there house-wise. The prices will tell you how much further you have to go to reach the deposit – then you can start dreaming about your new life, and make your dreams into reality.

  5. Reply
    January 13, 2013 at 8:51 am

    I just bought my first house. I would try two things. If your credit isn’t good try fixing it. This will take awhile. Review your credit reports and make sure everything is valid. If not you can right letters/petition to have things removed. If it is valid start repairing. Make payments. Only charge what you can pay off each month. If you have a huge balance, stop charging and start paying. Make hard decisions and go without. Simple things can help like switching to a cheaper cell phone package, removing unnecessary things like text packages, etc. If you have a cable package with all the bells and whistles remove the HD, DVR, movie package options. If these still don’t apply to you identify the reason for your bad credit. If you just don’t have any get some credit cards and start building-wisely-only charge what you can pay off each month. If you have to much on your cards switch to a new card that offers no interest for the first 6months-1yr. If you have defaulted on credit cards and that is the reason your credit is low then start using credit wisely now. You won’t be able to change anything that quickly so the best thing to do is have a substantial down payment. You won’t get the best interest rate if yu have bad credit, but with a good down payment you can usually still qualify. I am talking like 10-20% down. You pretty much have to have some kind of down payment these days and while it might be okay for the person with excellent credit to only put 3.5-5% down you need to make up for the low credit score. Remember also that a house isn’t just rent/mortgage, it is property taxes, mortgage insurance, PMI, home owners insurance, and then come the maintenance/repairs. Really examine what all the costs will be. If you think your mortgage + taxes + insurance + PMI will be around $ 900 and your rent is only $ 700 then start taking the “extra” $ 200 a month you will/would be spending and either save for a down payment or put it towards paying down bills. It also doesn’t hurt to do a pre-qualification just to see how much you can afford with your income/expenses. Realestate and Mortgage websites have great calculators. I really recommend finding the max you can afford in a mortgage and then the average for your areas taxes, insurance, PMI for loan, and then saving the difference between this ammount and what you currently pay in rent. This will also make the transition to home ownership/bill paying easier. Other ways to save for a down payment include getting a roommate, living at home longer, or spending a year or two in a less quality apartment. You can also see if any family member would be willing to loan or give you some funds for a down payment. In short my advise, fix credit, and counter bad credit with a substantial down payment.

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