575 credit score-need help on first time home buying (home loan, interest rate, approval)

[mirela26]

hi...i have been reading through posts for the past 3 hours and can`t find anything similar to my situation...
me and my husband are trying to buy a home for the first time and had a local mortgage broker pull our credit to see what we qualify for only for her to give us a big speech about our credit and how important it is like we didn`t know...we both are young and had some bad descions reflect now on our credit...we have both a credit score of 575...she now told us that the lenders she works with only do fha loans now and they require a 620 credit score...told us bunch of bs about obtaining a secured credit card and spend half the limit per month and keep making a min payment each month...which isn`t really bs but i tought that she could get us some kind of idea what we could get approved for...my husband has a repo that is 5 years old but he is currently making monthly payments on it for about 2 years now...he also got a new car loan in sept that we are ahead with payments we`ve been making 2 payments per month -why i ask myself that now...she says it doesn`t show that on credit report it only shows balance and balance of that loan is still not 50% below loan...ok me-i have nothing major on mine besides i was in the national guard for 3 years and got an honorable discharge but the military wants their bonus back...which is 1800 and i`ve been writing to diff ppl to put me on some kind of payment plan noone ever responded...so now i disputed that myself on experian.com...my husband has a steady job income for 07 was 21000 and for 08 34000...anyone has any idea how to go about a first time homebuyer loan ...we only have about $5000 to put down if required...pls any help would be greatly appreciated...

[ZugZub]

Frankly, 575 is a TERRIBLE credit score. Get that cleaned up, save a decent down payment, and then think about buying a house. You're not marketable material yet.

[mirela26]

thanks...what big help you are...they shouldn`t let ppl like you even post here lol...marketable material?wtf...i know you brokers love you someone with a 800 credit score...less work for you and big commission..so don`t reply any more because you are NO help...

[Daddys///M3]

Unfortunately your broker is right. Many lenders have recently implemented minimum FICO scores of 620. Although FHA does not have any minimum score guidelines, many investors have stricter guidelines that supercede FHA's general guidelines and you can bet that if one lender institutes it, all others will follow suit.

That being said, there are still a few wholesale lenders that are allowing sub-580 FICOs for FHA, and quite a few mortgage bankers will go below 580 as well. Try shopping around, using the copy of your credit report that the broker pulled for reference so your credit is not pulled many times. Although it will not adversely affect your credit if you have multiple mortgage inquiry pulls within a 30 day period, any LO should be able to tell you based on the report that was just pulled if they even have a shot. Credit reports cost money. Many LO's charge the credit report fee upfront (and quite a few lenders have started charging application fees as well) so be weary of that. Hope this helps.

EDIT: On another note, I don't believe that ZugZub is a broker. Please don't label us as lazy and greedy because in the case of many if not all of the brokers/bankers that post here it is just not true.

[mirela26]

thanks a lot that was somewhat helpful...i appreciate it...i think i just might go with her idea of obtaining the secured credit card...she says it should bring the score up in about 4-5 months...so lets se..i don`t think the market is gonna go up any time soon...

[ZugZub]

Originally Posted by mirela26

thanks...what big help you are...they shouldn`t let ppl like you even post here lol...marketable material?wtf...i know you brokers love you someone with a 800 credit score...less work for you and big commission..so don`t reply any more because you are NO help...

Sweetie, 575 is a terrible credit score. Do you want us to sugar-coat it for you? Well, I won't. You need to clear your debt, improve your credit score, and save a GOOD down payment if you want to get a loan. And where did I say you need an 800? Hell, even a 620 would get you in the ballpark for someone to take a look at you. But right now, I think you'll get laughed out of the bank.

Sometimes the truth hurts, but it's still the truth. And no, I'm not a broker but it doesn't take a broker to see that your credit is in the toilet and it needs to come up if you want to get a good loan.

[middle-aged mom]

Just curious.....

Why the compulsion to buy, right now?

Why not take that $5K you have for a downpayment and pay off your current debt?

[mrsclmn]

Try looking at Bank of America. You said you were in the national guard for 3 years? Did you get deployed? were you medically discharged? If so you may be eligible for a VA home loan, but if not then probably not. The VA site says reserves and NG are elgible if they served for 6 years and have an honorable discharge. But I know at least with BoA, they said they really only look at the last two years. If you've paid everything on time for the last two years, you might have a shot. Then again, I don't know how heavily they rely on the credit score either. There are things you can do to increase your credit score, but it may take a little patience. It sounds like you want loan approval NOW, but you may have to work at it a little. You can dispute items on your credit reports. Maybe some will come off, maybe they won't. If you have collections, You can call and work out deals to pay a percentage of what you owe, or perhaps get a payment plan. Say for instance you have cell phone collections for terminating a contract early and you didn't pay the early termination fee and last phone bill, and they've added months and months of interest on it. You can call the collection agency and negotiate paying JUST the bill and maybe a small portion of the early cancellation fee, then have the debt considered SETTLED and have them take it off of your credit report. Heck, you may even be able to settle for just the outstanding phone bill. Do that for the next few months instead of making double car payments monthly. Get the copies of your credit reports and even if you get approved with a mortgage lender, still work on the negative items on your credit reports. Here's the thing... lower credit scores will get you higher interest rates. Higher interest rates will have you being able to afford less house. Just a 1% difference in interest rate is about $100 difference in the monthly payment. So if you get approved at a 8% interest rate you might only qualify for a $100,000 home. But at a 5% interest rate you might qualify for a $130,000 home, because the payments would be the same. So take the credit reports you have and shop around, but in the mean time, still take one thing at a time and work on clearing one item at a time.

[mirela26]

because the only thing on there that i have is a military bonus of 1800 and wrote to 3 differen addresses in past 5 months noone is responding...and my husband has a repo which he is currently paying on....

[mirela26]

and by the way we are just trying to get approved for 75000 house...there are some in 60`s....so i dunno i know it will take time...