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Old 12-08-2007, 12:27 PM
 
1,320 posts, read 2,468,092 times
Reputation: 405

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Hello, I have a questions that need some answer or advise. First of all, I am new to home buying so exscuse my "duh" questions.

My wife and two kids are ready for a new built home. We do not plan on moving until this summer when the kids finish the school year. So, we were thinking to start looking for a community to build now rather than later. We have a combined annual income of 68k and we are looking for a home up to 170k. My credit score is 591, but mostly b/c of negative hospital bills.

1. Even though we do not have all the money for down payment now, can we still go to our bank for a preapproval mortage loan? I understand the down payment is not due until closing cost anyway.

2. Should we find the community where we want to live first and then try getting a preapproval loan?

3. With my credit score how much interest do you think I will get on the home mortage? I am thinking about 9%.

4. With that credit score is best to wait until it improves so my interest will not be so high. We can remain in an apartment another year if needed.

Thanks in advance. Any other advise is well appreciated.
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Old 12-08-2007, 01:23 PM
 
Location: Chambers County
1,133 posts, read 1,975,136 times
Reputation: 1176
I would work on that credit score first and foremost. If you don't, you will pay for it for years and years... Pay off all small debts, first. Tighten your expenses up and accelerate the payoff on the other debts, without generating additional debt. Do not request additional credit, because that would drive down your already low score. Put your financial house in order before initiating a build. If I was choosing at this point, I would look for existing real estate bargins instead of trying to build. You could always build later as finances improve. Hope this helps, good luck.
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Old 12-08-2007, 03:48 PM
 
1,320 posts, read 2,468,092 times
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Thank you for your advise.

We are heavily considering waiting until my credit improves. I have been paying all bills on time and working paying off my car note.

I think it is best to get my credit score up.

If my credit score is 591 now, can it improve to 700 in one year?

Thank You
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Old 12-08-2007, 08:50 PM
 
Location: Houston, TX (Bellaire)
4,900 posts, read 12,786,275 times
Reputation: 4171
Also keep in mind that if you are going to buy new construction then they will want you to use their lender, so getting pre-approved with another lender before hand is probably a waste of time, and banks charge fees to apply with them so a waste of money as well.

With a credit score that low you will probably pay .5%+ extra for your loan so that can cost a lot in the long haul. Take 6 months and try to pump up your score and save up for the down payment as well. A 170k house would have monthly payments around 1600 a month so take 1600 and subtract your current rent and save that amount per month. If you cant manage that then ask yourself how you will manage to pay that mortgage .
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Old 12-09-2007, 09:13 AM
 
56 posts, read 214,992 times
Reputation: 19
I just bought a home with a low credit score (not that low thought) and it was VERY VERY hard. You DEF need to wait!!!!!!!!!!!! Everything is based on your credit score - homeowners insurance, auto insurance. I wish we would have waited a little longer and saved a little more. Your fico score needs to be at least 620 and really it should be higher than that.
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Old 12-09-2007, 09:16 AM
 
56 posts, read 214,992 times
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Dont bother with getting pre approved right now. I would wait for at least a year. The mortgage companys are tightening down with all the foreclosures so work on getting your credit scores up and save $$$$$$$$$$$$$
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Old 12-09-2007, 01:48 PM
 
1,320 posts, read 2,468,092 times
Reputation: 405
Thank all of you so much for the advise.

I will wait and try to fix my credit score by making payments on time and taking care of some old hospital bills.

Should I try to pay some of the hospital bills I owe; I owe about $7000 or just continue paying my car note, student loan, and credit card on time?

Thank you all.
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Old 12-09-2007, 08:22 PM
 
Location: Houston, TX (Bellaire)
4,900 posts, read 12,786,275 times
Reputation: 4171
Making some payment every month, even if small, helps your credit score. Don't even think about buying a house if you cant pay off all your bills. Your bills will only be higher in a house. I assume it will be more sq footage than your rental which means more for utilities. Also maintenance, lawn service and don't forget all the misc. costs you have after you move in like buying any appliances that are not included, blinds and window treatments, garage door opener, furniture, and lawn care tools if you don't have that stuff yet. Also most builders expect you to prepay any upgrades these days so if you want to customize your house (counter tops, tile, etc..) you may need to pay a few thousand up front for that on top of your earnest money and than your down payment.
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Old 12-10-2007, 07:58 AM
 
56 posts, read 214,992 times
Reputation: 19
I would pay off all of your debt if possible..sometimes the lender, if you dont have strong credit or a hefty down payment, requires you to pay off or most of your debt before they will loan you the money
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Old 12-10-2007, 09:03 AM
 
Location: Clear Lake, Houston TX
8,368 posts, read 28,903,278 times
Reputation: 4693
Sounds like if you want a house now you need to lower your budget to maybe 120-130k. Oh yeah, and hopefully you have health insurance and a little savings to cover your policy's 'out of pocket annual maximum' in case of a family catastrophe.
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