When you have questions, everyone has an opinion masquerading as the answer. Even worst is when you start making assumptions from a limited knowledge base. Often, I will hear from someone who wants to get out of renting but assumes they can not possibly afford to buy a home at this time because of 1) their credit score, 2) lack of savings, 3) past bankruptcy, 4) past foreclosure or short sale or some other other reason they feel make the whole issue not worth pursuing.
Rather than assume your credit score is bad, why not check it out? You can get your credit score at myFICO.com . Some people are reluctant to check because they heard that every inquiry negatively impacts the credit score making it come down. The good news is that myFICO.com is the consumer site of the Fair Isaac Corporation and, on this site only, your inquiries will not impact your score. Be aware that there are 3 scores, one from each of the major credit bureaus. Mortgage lenders will use whichever score is the middle one. That is, they will ignore the highest score and the lowest score and only use the one in between.
Mortgage loans are available at scores of 700+, 640 to 699, 620 to 639, 580 to 619, 550 to 579, 500 to 549 and even without a credit score. Generally speaking, the lower the score, the more requirements of you.
Lack of Savings
While it is a very good things to have savings, there are grant programs that allow you to receive a grant for the down payment. You may even be able to pair this grant with assistance to cover some of the fees involved in buying a home (known as Closing Costs). Grants and assistance are available at 620 and higher credit score.
Even with a bankruptcy in your past, you are not automatically disqualified. Though a Chapter 13 bankruptcy will stay on your credit report for 7 years and a Chapter 7 bankruptcy will stay on the report for 10 years, you do not have to wait that long to get a mortgage.
In a Chapter 13 bankruptcy you can get a mortgage with the judge’s permission. That’s right, you do not have to wait. You simply have to go to court and show the judge how having a mortgage will not change your financial situation and the judge will approve the mortgage obligation within your existing Chapter 13 bankruptcy.
For a Chapter 7 bankruptcy, you need to wait 3 years to qualify for a mortgage. There is no need to go to court to get an approval by anyone. So while the bankruptcy will continue to show up on your credit report for 6 more years, you can get a mortgage.
Past Foreclose or Short Sales
As with a bankruptcy, Short Sales and Foreclosures will continue to show up on your credit report for years to come. However, this does not need to stop you from buying a home. Lenders will make a mortgage loan once you are 4 years from completion of the foreclosure or short sale.
If you find yourself not quite meeting any of these requirements, use the coming year(s) to boost your credit score, to set some money aside as savings and to better prepare yourself for the loan application.
If you have questions on how to boost your score or anything else related to buy a home, reach out to me (760 622 5087 or firstname.lastname@example.org). Don’t let assumptions make you waste another day telling yourself you can’t own because _________(fill in the blank). You can own, and I can show you how. You just need to ask questions.