Are you tired of renting but don’t think you can buy? Maybe you have a foreclosure or bankruptcy in your credit history. Perhaps you don’t have a down payment. There are several reasons why people don’t believe they can buy a home but, only a few of them will actually prevent you from buying.
There are two things you must have if you want to buy, other than that everything else can be worked up to. One, is a job and the other is, good money management skills. Being able to manage your money is the single most important aspect to homeownership. If you can’t manage your money, it doesn’t matter how many jobs you have, you may never be able to buy a house; and if you do manage to get one, the odds are very good that you won’t have it for the duration of the loan. Your money management skills are reflected in your credit score.
While some lenders will give a loan with lower scores and others want it to be higher, most lenders require a 620-minimum tri-merge credit rating before they’ll give a home loan. Annual Credit Report.com is free. It allows you to check your credit report but does not give your credit score. To get your score, you'll have to sign up with one of the three reporting bureau's: TransUnion, Experian, or Equifax. I know Experian will give you their rating with the other two, but I don't know how the other sites work. Experian does not charge an initial fee and will even allow you to dispute a claim against you; but their free service is only for a short time and it's only free one-time per year. For a government backed mortgage, both Fannie Mae and Freddie Mac require your FICO rating. For a fee, you can check that at MyFico.com. Its rating is the most accurate you can get.
Having a job is important because it shows the money lender that you’re a worthwhile risk. Most people, even you friends and family, won’t lend you money unless they’re sure there’s a chance of getting it back. Banks and mortgage lenders are no different. As long as you have an income, you have a good chance of getting a loan.
Another thing you need that can be worked towards is a good debt-to-income ratio. A good DTI is an accredit to good money management skills. Basically, your DTI answers the question, how much money do you have coming in compared to how much money do you have going out, every month. The ideal for most lenders is 43% debt to income; but, you’ll need to speak to a lender to know for sure their requirements.
Even though the DTI and credit score are reflected in your money management skills and, good skills are essential to buying a home, both your DTI and credit score are things that can be worked up to. What I mean by that is, even though either of these two may be less than favorable, you can improve both over time as long you’re working towards your goals. That is where our credit repair assistance comes into play. Our teams will help you define your goals and then give you a clear-cut plan to work towards them. As long as you can keep yourself on task, then homeownership is in your future.
As far as the down-payment goes, depending on the size and type of the loan, the money down amount ranges from 0 to 20%. The thing to remember here is, the more money you put down, the lower your monthly payments will be. If you’re a veteran, then your down-payment amount is 0. However, you do still need to spend at least $500 out-of-pocket as a show of good faith. That money can be spent on anything and at anytime in the process as long as it comes from you.
Just to recap, “Yes, you can! Buying” simply means, it doesn’t matter what you did in the past, it’s how you handle the future that matters to buying a home. Poor credit can be repaired over time with a concentrated effort along the right path. Bankruptcy and foreclosures take time but not nearly as long as you may think. Give us a call, we can help you work through the issues and help you accomplish your goal of becoming a homeowner.