Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Applying for a loan with sub-par credit
So, we are thinking about possibly purchasing a house. The only problem is our credit isn't so hot. In the last year though we've paid everything on time and paid down balances more so than we have. So we're on the right track, but not quite where we want to be. I wanted to see if any one knows of any particular banks that work with people whose credit is sub-par? We don't mind renting, but wanted to see if we could qualify for a loan first. I posted this on my city board as well since there are various banks around. Help! Thanks 
Re: Applying for a loan with sub-par credit
Is there credit score high enough to qualify for an FHA loan? I think they have lower qualifications than conventional loans have. Most major banks process FHA mortgages. Do you have a down payment fund, emergency fund, and closing costs already saved up? If not I would not look into buying a house and would continue renting until you pay everything off and have a nice savings in place. Owning a home can be VERY expensive and you don't want to end up in a worse situation.
Just concentrate on paying off your debt and your credit will continue to raise until you are a good financial situation to buy.
As others have said it you don't need a 750+ for a loan. It needs to be decent, below 620 and your probably out of luck. Below 650 and your going to be fighting for a decent rate.
That being said. Explore your options. Take a real hard look at your finances, be realistic in needing at least 3.5% down for an FHA loan, plus the possibility of closing costs with extra in the bank for improvements, upkeep and emergencies. Go through prequal and see if what your approved for fits with homes you like and a mortgage payment you can afford. Worse thing that happens after you go through this you realize you need a few more months or years but at least you know where you stand.
October 13, 2012
620 or 640 is not considered 'super low'. It might be a 'lower' score for a mortgage and you may not get the best rates...but 620 is fine for USDA loans and 640 is fine for FHA and FHA 203k loans.
http://www.creditscoring.com/pages/bar.htm
My credit score and my husbands are in the 700s and we got locked in at 4.18% for 30 year fixed...a friend of mine had a credit score of 646, makes less money and has less debt-and she qualed for 4.25%.
I would wait and continue to pay off debt and SAVE.
You need a downpayment, closing costs, moving costs, utility start up costs, purchases of items that you need with a home that you don't when you rent (ladders, lawn mower, tools, etc), repair and renovation costs, general maintenance costs, decorating and furniture costs. AND still have an emergency fund of 6 months EXPENSES.
With a poor credit score you will pay a much higher interest - which over time will cost you a huge amount more than if you wait. Housing will remain low as will interest rates for the next few years.
I guess I should have said "Super low to me". My bad.
Thanks, everyone! I really appreciate your feedback. I think an FHA loan would be just right for us!