How Possible is it to get approved for a mortgage with little/no/bad credit?

OK - My mom is insisting that since i would be a first time home buyer that I would qualify for a lot if I would try to get my first house. I have been SLOWLY getting bills paid off and getting things in order, but like I said it's a slow process and my credit score - the last time I even checked it was in the 400's. Is it even possible for me to be qualified for anything? I don't want to waiste my time or get my hopes up for something that can't happen.

Hi Jennifer,

I am a Branch manager at a mortgage firm and i want to be very clear about something before fully answerign your question.

Just know that responses you get from this site are opinions from people that are trying to do a good deed, and help you answer your question.

Unfortunately, not everyone realized the complexity of the mortgage industry these days..

Im sure you, your mom, adn everyone else who is reading this post has heard about the troubles in the housing and mortgage industry as of late.

Mortgage forclosures, adn bankruptcy's are at all time highs, and have been for a long time..

THIS IS BECAUSE OVER THE LAST 5-10 YEARS, MORTGAGE LENDERS WERE JSUT GIVING MONEY TO ANYONE WHO WANTED TO BUY A HOME!

take your time to read some articles about this on YAHOO REAL ESTATE section.. Threre are hundereds and hundreds of articles out there that explain where this industry is at..

Now, back to the point, because jsut about anyone was able to get a loan, people that couldnt affort their payments are now losing thier homes..

And you cant blame the bank, they are a business.. They make a profit by lending people money and collecting interest... If a person isnt making their payments, then the bank is losing money, and they will be forced to forclose onthe property.. its the nature of the beast... you have to pay your bills!!!!

So, because banks are having delinquent loans, the bigger banks arent buying certain loan programs anymore that have been known to lead to forclosure or delinquency...

So, what we have noticed is a domino effect.. Banks are forced to raise rates across the board, and elimninate about 80% of programs that people were qualifying for 1 year ago that seem to be leading to forclosure and delinquencies...

My point, its THE HARDEST TIME TO GET A MORTGAGE THEN IT EVER HAS BEEN!!!

Here is what you need to do to get a mortgage in the next couple of years...

SAVE YOUR MONEY!!!

The biggest key into getting qualified besides credit, is LTV or loan to value ratio.. Basically the lower the loan is compared to the value of the home, the lower the risk to the bank..

example: loan for $50,000 adn the house is worth $100,000... THat puts you at 50% LTV, and VERY LOW RISK to the bank...

you will have a much better chance qualifying for a mortgage then... THe only way to get a low LTV is to save for a down payment!!!

2nd thing: DO NOT USE CREDIT CARDS, DO NOT MISS PAYMENTS ON CURRENT LOANS, AND TAKE GOOD CARE OF YOUR CREDIT!!!!!!!!

This is VERY VERY important in qualifying for a mortgage...

Most importantly, for your first home, dont try to get a place that you will struggle to afford!! Get a house that you can comfortably live in, but dont look for top of the line!!

This is another reason there are so many forclosures these days! because over the last few years it was so easy to qualify for a loan, people were getting loans they simply couldnt afford!!

For instance, if you make $30,000 per year ($2500 per month) DONT TRY TO GET A $300,000 LOAN!!!
With a 7% interest rate, your loan would be over $2,000 per month alone!!

Make sure you take your total income, subtract debts you currently have..

example: $2500 per month.. subtract car payment and insurance $400 per month.. Student loan payments: $300 per month, and lets say miscellaneous of $250 per month...

That leaves you with $1,550 left over... Now, you should only take a mortgage out that is about 40-50% of that amount... Or, $775 per month...

THis allows you to live comfortably without being strapped every month, and allows you to save money in the bank...

Just an idea, $775 for a mortgae means under a $100,000 loan is what that person should be looking for....

I hope this helps you understand some of the basics.... If there is anything else i can help with, feel free to contact me through yahoo answers!

And again, look at facts and articles from people who are in this industry NOW, not people that used to be, or know someone that was in the business...

This market has changes EVERY DAY, so someone who did this 6 months ago is out of the loop and may not know all of the facts about where lending is TODAY!!!

GOOD LUCK JENNIFER!!!!

Jason Fry
Branch Manager &
Licensed Mortgage Loan Officer

This just became a lot harder, in light of the recent sub-prime mortgage lending crisis that's sweeping the country and hurting lenders and buyers alike. But, you should contact a reputable lender to get a true look at what's possible. Talk to your friends and get names of lenders they have used.

Many lenders, banks in particular, deal in any sort of secured loan other than second mortgages. Other institutions deal almost exclusively in secured loans. Finance companies that deal in secured loans can be found in your phone book, newspaper, and increasingly, online.Shopand can get a good idea of what each can offer you in terms of interest and other finance charges and fees. Choose the best one for your needs, and apply for the loan.

This is definitely possible!

I'd suggest looking into an FHA loan. They are not nearly as "credit-driven" as conventional loans. Also, they allow for a non-occupant cosigner, meaning your mom, dad, or other close relative could sign with you to improve your loan profile, and they don't have to live in the house.

FHA loans have much lower rates than subprime mortgages, and only require 3% down payment - which can be gifted.

Feel free to contact me for more info - my email addy is listed below:

There are several great loans out there for first time buyers, even with poor credit, such as an FHA. However, I must tell you that unfortunately your present credit/score would not place you in the best mortgage situation. You'll pay a premium if you can qualify. 400s is pretty low.

But the good news is that you're on the right track! Continue rebuilding your credit by paying off your bills and remaining current with them. If possible, try paying them off at a little faster pace than you have been and you will start to see a constant rise in your credit score. Pay your higher interest debt first (such as credit cards).

I have to say that I would recommend you get your score up to at least 600 and you'll see your options greatly increase and you'll pay much less for a mortgage.

I have attached a link to a PDF that contains a ton of helpful hints on how to repair your credit!

Good luck!

In the current real estate environment you can get a mortgage starting at about a score of 580 if you have a good downpayment - 10%-20%, can show two years good employment history and have a small debt-to-income ratio. You can get better terms and interest rates if your score is around 640- If you have a score of 680 and above, especially if it is over 700, then you can get loans for little or no down.

Lenders also like to see that all bills are paid up, and there have been no late payments lately, preferably for at least 6 months.

There are first time buyer programs that can help you get into a home for little or no down payment. You usually need a score of around 620-660 to qualify for those.

So it looks like you have more work to do, but if you are getting things in order, that is a good thing. It will take 6 months or so but you can get there.

I wish you well

Don't lose hope if you're looking to buy a home. There are so many different ways to fund a home now, just about anyone with any kind of credit can get into a home, regardless of credit situation.

Of course, some will cost you more money in the long run, but a home it's still one of the best investments that you can make, so, in many cases, it's worth it, especially for the first year of ownership.

You should shop around, and ask different lenders what kind of programs they have, and if they can help. Try to find a lender that specializes in bad credit mortgages. You can find some bad credit mortgage lenders listed on this page on and off:

http://www.axalda.info/bad-credit-mortgage.html

The best answer I can give you is move to Australia where we don't really place much emphasis on credit scores.

There is a website http://www.badcreditmortgage.com.au... that caters for people with bad credit who are looking for a mortgage. They offer articles and most important confidential advice about your situation. Their services are free.

However cos you're in the states, i would suggest that you
1 find a property you like,
2 apply for a higher interest rate
3 refinance as soon as you can to a lower rate

Good luck

400's=NO Loan
600+=Loan

There are first time homebuyer programs out there, but they are NOT as common as before. You could qualify for an FHA loan, which you put down between 2-3%. These have become harder to get too. Banks were too free with their money and now their credit lines are full and they cannot sell of the loans, so now they can't lend. This is not true for all banks/lenders, but it is becoming the case for larger lenders.

My personal Advice for you is: keep paying off your bills, save 5-10% of every paycheck in an account that is just meant for a downpayment. In 2-3 years try evaluate how much you've saved up, as well as how much of your debt you've paid off. Then go see someone about a mortgage.Be sure you pick a good trustworty place that has YOUR interest in mind. I've been a Realtor for a while now and I've seen both Realtors and Loan Officers who do NOT care about you and what you can afford, they just want the deal to close because that is how they get paid. Find someone who cares about you and have them help you out.

Jennifer the only one who can tell you that is a mortgage loan officer, not these yahoo's on here! I suggest you visit a couple of local lenders, then can take a look at your total financial picture and give you the correct answer to your question. Using an internet lender is asking for trouble and when it happens, believe me they won't be there to even answer the phone. So stick with local lenders.

I know you don't want to get your hopes up, but do your homework correctly so there is no misunderstanding later. And if you aren't sure you understand, don't be afraid to ask.

Good Luck!

Not if your credit is really in the 400's, but how do you know that's where it is? Call me, I can put you on the right path, if I can't help.

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