My husband and I are trying to buy a house and we need some advice. We have applied with two mortgage brokers who specialize in "creative financing" They have both told use that the only thing we qualify for is a 85% loan with a 15% seller carry back and at a rate of 11-11.5% We have had problems even finding properties where the seller is willing to carry back. But we have found a house that we like where the seller is offering a lease purchase. Basically we would lease the house for about 8 months and then purchase...they want it sold by Jan. 2002. They did, however, say they would consider a 15% seller carryback and if they did we could purchase right away without having to lease first which would be good for us because we need a tax write off. But I am wondering if we would be better of leasing for the 8 months while we aggressively work on improving our credit so that at the end of the lease we could qualify for a mortgage at a better rate and without the seller carryback. We recently hired Junum to work on our credit and I am getting lots of helpful information from this board but am just not sure what is realistic for us in terms of how much we could raise our scores in that time frame. This is what our score are now: Exp. 520, TU 513, Equifax 479 for me and Exp. 534, TU 499, and Equifax 524 for my husband. Income and debt ratio are not a problem....combined income of $10000 per month with low debt ratio (because we can't get credit!) How much can we expect our scores to increase after removing negatives....most of them are over 2 years old. And how much can we expect them to improve after adding positive credit lines. Right now i only have 1 credit card and my husband only has 1 credit card and a brand new car loan. Which will boost our credit scores the most and the fastest...removing negatives or adding positives? Any advice or suggestions would be greatly appreciated. Thanks!
Others may disagree but the method I used to improve my credit was to acquire many tradelines to boost my score. One credit card will just not do it in my opinion. I suggest at least 5 tradelines to get a significant score boost. These trades will have to be perfect for several months and that is assuming that the tradeline that you have now has had a great history. With scores in your range even subprime cards may be difficult. I suggest you get a few secured credit cards. This will help with you decrease the number of unnecesary inquires. I suggest secured FCNB (maybe 2:MC & VIsa), they are a great bank. Capital one secured. I also suggest FNBM for you b/c I am not too sure who you can get at this point. I dont like FNBM b/c of the fees but they were my first secured card and they served their purpose. I went from a 593-702 in 12 months. I had many deletions and add 13 credit cards added, 1 car loan, 1 paid secured loan and a gazillion inquiries. To answer your question, which would boost the score most, adding or removing ...the answer is both. Add new tradelines will not help your score initially too much when you have a history of delinquencies b/c you are a big risk in the score systems eyes. But the more delinquencies you have deleted the more the new tradelines can boost the score. You must work hard to get new trades and let them mature. At the same time send out those dispute letters so when the times comes your score can peak. Hope This Helps. roni
Thanks for your advice Roni and Lizardking...I really do appreciate it! Since we need to add positives should we get several secured cards or just one and try to get others unsecured? Does it matter if they are all secured? I am not sure at this point what we can get other than secured cards. Do they put an inquiry on your report when you apply for secured cards? I got an offer from First National Bank of Marin and I am planning on applying for FCNB secured and more. My husband got an offer from First National Credit Card that is unsecured but it does not say it is preapproved so I am not sure if it means he will get it for sure or not. We have bank accounts with Wells Fargo Bank and US Bank both of which offer secured cards. Which ones would you suggest we go with? If we got them all would that be too much at one time? Would our scores initially go down due to too much new credit? But then would it help after 6 months of on time payments? Thanks in advance for your advice!
Sorry for all the questions but we really want to do the best thing here....so if you were in our shoes would you go ahead and do the lease for 8 months hoping to get our scores up enough to qualify for a decent rate mortgage at the end of that time OR bite the bullet and buy at 11% which would only be for 24 months then we would refinance to get a better rate. I'm just not sure about being able to raise our scores enough in 8 months but yet at 11% our payments are going to be outrageous but it would give us 24 months to work on our credit.
Lizard or Roni, Who is FCNB? Do they have a a website I can go to. I want to raise score for the same reason. Do you have phone number for them?
Shelby, I don't want to make things complicated with a new option, but there is a type of creative financing called "morgage deed," "contract deed," or "bond for deed," (depending on which state you live in it is called a different thing). Basically, you pay something down, get a contract to transfer ownership in the future, usually 2-4 years. In addition, you assume the owners payments (or whatever agreed on) and you use a third party to administer the deal, a lawyer to draw it up. Advantages: If your credit is so messed up it gives you a few years to get it straight and actually get in a house, you can avoid HUGE fees on subprime lenders (do not forget early termination of contract, they usually nail you for 3-5 years) you may avoid PMI, you may have lower payments because you assume his loans, or agree to an amount. Disadvantages: It is stricter than banks if you default, don't be more than 30 days late, you will incur extra costs to refinance, you may not get a tradeline on you credit (maybe you will also), 3rd party costs around 25$ a month. Try www.escrowserv.com for some info.
Shelby a lease option might be a good way to go. What you will want to know is how much of your lease payment is the seller is willing to credit you toward the purchase price of the property. This can make all the difference into he world to you. It's all about negotiating and it's very possible for you to have enough rent credit applied to the purchase price that it would only make sense to lease now, fix our credit and then purchase at a low rate. A very good site which has many mortgage brokers and lease options pro's would be: www.creonline.com I'm sure the people here can help you out on their message boards. CYA: Iâ??ve heard of what you speak of but with the use of a Land Trust as in PAC Trust?
Thanks Tracy! They are offering a 50% rent credit. $2000 a month rent with $1000 going towards the purchase price. Does that sound like a good deal?
Tracy, I don't think it is the same as a land trust. It is something that has been on the lawbooks for decades, but is now recently being used because it is good for both seller and buyer, seller because he can get more favorable terms in a buyers market, and actually make a sale in a slow market. The buyer does not need a credit check to qualify, so if he/she is messed up so bad, it is like a lease purchase in a way that one can actually get things rolling, and freeze the price.
CYA and Shelby We did the "Land Contract" on our condo for a couple who couldn't quite qualify for the house. It took 2 years before she eventually assumed the mortgage. One disadvantage is that Shelby said that she needed the tax break next year. With a land contract you do not get the tax break. You don't own the house so therefore you can't take the tax break. CYA is right that you have to sign a contract with the sellers. It basicallt says you agree to make the payments. At any time that you default, the owners take back the house and you lose every cent you have put into the house until then. ALSO a big disadvantage is that mortgage comapnies DO NOT LIKE THIS. If they find out that you are doing a land contract they CAN or MIGHT pull the loan and demand full payment from the sellers. When the lawyer told us this we almost didn't sign, but we liked the couple. Of course the lawyer said if that were to happen, you just rip up the contract and the seller tells his mortgage company that the deal ended. This is really not a very good option. Try to do ANYTHING else but this. Do what roni and lizard suggested. Get 2 more cc's and let Junum work to reduce your negatives for 8 months while you lease the house. judy
