Hello! I am wanting to buy my first home. Does anyone know if it is even possible to buy a home with a 500 FICO score & no money down? I am new to this & have no idea where to even start. If anyone can make any recommendations or where to start, lenders to go with, etc. I would GREATLY appreciate it! I live in Florida, if that matters. Thanks!!!
Typically we need you to have at least a 560, and a 600 or above makes it much easier at 100%. Is there perhaps a spouse with higher credit scores, even if not the primary earner? An option might be FHA if you can qualify for it. You have to put 3% down, but it can come from a variety of sources including gifts. Also have you identified the issues contributing to the lower scores, and do you have a plan in place to correct them? This board is certainly the best place to be to get that accomplished.
I am single and this home would be on my own. I do not have family or anyone helping out. I am working on fixinig my credit. Mainly charge-offs. I don't even know what a FHA is - can you tell me? What does it take to qualify for that?
FHA is a loan which is insured by the government. It doesn't focus as intensively on credit scores. They'd look at your recent credit history, and would seek explanations for derogatory items. If there are unpaid collections or chargeoffs, you would most likely be required to settle them before or at closing.
Oh, OK. Thank you SO much for your input. Do you know if they look at reports from all 3 of the bureaus or just focus on one mainly? My derogatory items are different on each report. Thanks!
On FHA they will look at everything they see on all three. What they'll usually do is collect all of your info and run it thru automated underwriting. If this AU approves you, then it will simply spit out a list of stipulations which have to be met (i.e. proof that account X is settled, documentation to verify X dollars in investment account, etc.) If not automatically approved, then your loan officer has to put together a package including letters of explanation for the derogatory items, and also a cover letter explaining mitigating circumstances which the AU doesn't see. On the conventional lending side, they'll look at the middle credit score (although there are certain programs which will average all the scores, or use the top score rather than the middle one). Collections and chargeoffs older than a year or two can be disregarded, and medical collections will usually be disregarded as well. They'll look for a certain number of credit lines in good standing, often with a 12 or 24 month history. And documentation of housing payment history (12 months of cancelled rent checks, or a letter from rental management company) are usually instrumental.
Can you tell me about how long the process takes with FHA? It seems with all that verifying on information it would take forever! Thank you.
It is more paperwork intensive, usually, because it's a government insured loan. Loan processors can verify the information with a relatively quick turnaround, but depending on the complexity of the loan it could take a few weeks. To get a better idea of whether FHA might fit, best idea would be to ask around locally for a referral to a lender who handles FHA. (I am a mortgage consultant, but if it's FHA I can only do it within 250 miles of my office.)
Can you tell me how to find out where an FHA lender is in my area - do I ask my bank? Or is there a website you know of. Thank you VERY much for all of your help & input.
You should look at why your score are at 500. Is is because of chargeoffs, or colections. Have your bills been paid on time in the last year? You may qualify for FHA but you may need a little more time to get your situation ready to get the best deal. Where are you located? Nick Kusan Professional Mortgage Consultant nkusan@prioritymortgage.com Lic.#15112 MB.#3860 Direct Phone (614) 410-9112 Direct Fax (614) 410-9108 Toll Free (888) 332-5301 Ext. 112 150 E. Wilson Bridge Road, Ste. 350 Worthington, OH 43085 Visit us at www.prioritymortgage.com
Re: Re: Mortgage with 500 FICO You can find lenders through sites such as lendingtree.com....but you might want to ask around with friends, coworkers, etc. because then you are likely to find someone whom you'll know to be reliable and efficient.
Re: Re: Mortgage with 500 FICO My score I think is so low b/c of charge-offs & late payments within the last year. Although, I have completely been turning it around - it doesn't seem to have affected me credit score greatly yet. I located in Palm Beach, Florida.
Re: Re: Mortgage with 500 FICO I do nto reccomend lendingtree.com because they sell your information to 4 brokers then you will get several calls from people trying to pull your credit and bothering you. You just need to find a reputable broker that is willing to work with you to get your scores up adn let you know what you need to get to where you need to be. Nick Kusan Professional Mortgage Consultant nkusan@prioritymortgage.com Lic.#15112 MB.#3860 Direct Phone (614) 410-9112 Direct Fax (614) 410-9108 Toll Free (888) 332-5301 Ext. 112 150 E. Wilson Bridge Road, Ste. 350 Worthington, OH 43085 Visit us at www.prioritymortgage.com Lending in Ohio And Florida
Re: Re: Mortgage with 500 FICO How old are the chargeoffs? Do you have the ability to pay them off? Do you have any acitve tradelines that are reporting every month. If you want to contact me I can let you know where you need to be and what needs to be done at no cost to you, I am licensed in Florida. I can get you a copy of your credit report. Nick Kusan Professional Mortgage Consultant nkusan@prioritymortgage.com Lic.#15112 MB.#3860 Direct Phone (614) 410-9112 Direct Fax (614) 410-9108 Toll Free (888) 332-5301 Ext. 112 150 E. Wilson Bridge Road, Ste. 350 Worthington, OH 43085 Visit us at www.prioritymortgage.com Lending in Ohio And Florida
Re: Re: Mortgage with 500 FICO I would REALLY appreciate that. I will send an e-mail to your personal account right now.
You can try for an FHA loan which is supposedly not credit-score driven, but realistically the same issues that are keeping your score so low are very likely to disqualify you for FHA. FHA, if you have the right underwriter, can be very forgiving of poor credit, but a score of 500 places you in the bottom 1%, and that makes you a huge risk. Realistically? I did a similar home purchase a few months ago, a woman with a FICO in the low 500's, purchased a lower-end home with a seller-carryback and maximum seller paid concessions, and the deal was a huge amount of work for everyone involved. She ended up paying a high interest rate on a sub-prime loan, but was glad to get into the home anyway. My recomendation? I recomend you not listen to loan officers who are trolling for your business and who's self-interest is to try to get you to do something today, and to just take a year or so to work on your credit and save for a down payment.
Re: Re: Mortgage with 500 FICO As someone who is also a mortgage originator, in my opinion this is a rather unfair remark. I have bumped into other originators on this board but don't believe we're all "trolling for business". In fact, in this thread I mentioned that the person would probably need to gain 80 points or so to get in the ballpark of a competitive loan. I've also mentioned FHA, but can't personally do those loans unless they are within 250 miles, which is most often not the case. I actually have several people who are in similar situations, and whom I've worked with for several months as they got their credit on track. In none of those cases did I push them to "do something today" other than perhaps to fire off some dispute letters to the CRAs. In this and a couple of other threads, people specifically asked mortgage-related questions, so I don't think it's trolling to jump in and offer answers.
I'd suggest you going through the NACA program. Their website is NACA.COM They are an agency that helps people with poor credit and you can obtain a mortgage with no money down after going through financial responsibility process with them which is well worth it.
Re: Re: Re: Mortgage with 500 FICO I'm a mortgage broker too, and I agree that not everyone is trolling for business. I do think that one should be aware of another person's motives when taking advice, and when it comes to certain people like you and me, whose jobs are essentially sales, one should be cautious and a little skeptical, especially if it seems that person is telling you what you want to hear.
