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buying a home with bad credit
Hello, me and my girlfriend are both 20 years old. We are possibly pregnant and currently live with our parents. We are looking to get a place for us to live and start a family. We both have well standing jobs and would have no problem paying a monthly mortage.The only problem both of us have so so credit. We both have credit cards at the limit because of where we live now with our parents we need to help out and spend alot of money. We also have no one in our family that could co-sign with credit. We would probably have a down payment problem to its hard for us to save when we are paying for our familes bills right now. our city has a program that matches down payments and pays closing costs for new home buyers they match the down payment up to 5000 so if we had 2500 it would make our downpayment 5000. We really need a house asap though. Right now we havnt told our parents anything, so im trying to find out something on here. We arent looking for a multi-million dollar home loan. The three houses we are looking at are all under 90,000. We were wondering if anyone knew anywhere that gives loans to people with ehh credit and the rest of our situation? Please help us out!
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There are many different things than loan officers look at when they look at loan applications. Not everything is on the application itself. One thing I believe is still on the application which is marital status.
A married couple of your age is more likely to be given a better outlook than a cohabiting couple of your age. Commitment means a lot to some loan officers and may offset to some degree low credit scores, especially a young couple such as yourselves.
Also do not just look to Banks for home loans. Look at finance companies as well. Just make sure
they are a reputable company by checking with your local Better Business Bureau.
My mortgage is with is with OneMain Financial a company I can recommend as I have done business with them for many years. At one point I ran in to some financial trouble and they bailed me out by refinancing my mortgage. Interest rates were very high at the time and they told me they would refinance again when rates came down. My credit score was not the greatest at the time; now it is in the high 700 area and they are after me to refinance again. The difference now is I need the mortgage interest deduction for my taxes so I keep the high interest rate. The Phone calls are very amusing.
You won't be in that position with a young family though with a less than great credit score you may have to accept a higher interest rate until the have a year or two of experience with you then you can talk to them about refinancing to a lower interest rate.
Before you go to any bank or finance company sit down and put together a monthly budget. At the top is your combined monthly take home pay. Then list all of your monthly expenses, and items budgeted for, which would include:
Estimated mortgage payment, Utilities (Gas, electric, water , phone(s), food, doctors, clothing, daycare, car payments, car insurance, mortgage insurance(will be required), misc. bills entertainment, savings(even if it is only a few dollars a month) emergency funds. list any other items you feel you should have in your budget.
You may feel the entertainment, savings and emergency funds are optional budget items. Loan Officers like to see these on a budget. Entertainment is important because it is not good to be house poor. You need time to yourselves to get away and relax. Savings and emergency funds are also important as it speaks volumes about you to them.
Last but not least is finding a lender is a numbers game. If one turns you down keep trying someone will lend you the money. Also try and find a mortgage broker they only get paid if they find you a mortgage and they do all the leg work.
What is important here is finding a place for you and your new family. I know your living with your family and you say your paying their bills. That has to stop. Your adults now and your family, meaning you, your newborn child and wife/girlfriend come first. Your bills and your home come before everything and anyone else. If this also means you need to rent an apartment for a few years there is no shame in that. Make your budget and stick to in. Then pay of your bills and you will improve your credit and have money for a down payment.
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You just have to go around and check with banks to see who would be willing to loan you money based on your credit rating, for starters.
Then you need to find out how much they're willing to loan you based on your monthly income. Interest rates and escrow per month on a mortgage tend to add up to be quite a bit. (Escrow is what pays your property insurance and taxes.)
You may not be able to afford the payments on a $90,000 home, because monthly payments could be well over $1000. That might sound attainable, until you add in your other monthly expenses- Power, water, natural gas/propane, phone, groceries, gas for your car, etc. So you might have to look for a cheaper priced house that the bank would be willing to loan on.
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