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February 16, 2013 1:10 PM Subscribe
Should I attempt to buy a home with my poor credit (if it's even possible) or work on rehabing my abysmal credit?
posted by youandiandaflame to Work & Money (12 answers total) 4 users marked this as a favorite
I'm looking to buy a home. Here are some details I think might help me (and you!) unpack my question:
-- My credit score is around 590.
-- I live in a very rural area with tons of foreclosures.
-- I have about $18000 in student loan debt, currently in deferment.
-- I have about $2300 in other debt (between a hospital bill and a debt to a college. I can afford, with current savings, to pay both these off but I was keeping that money close as a potential down payment.)
-- I had applied for a mortgage on a foreclosed house. I was turned down because the lender wanted a credit score of 620 and the house was about $80000.
-- There is another house, of which I know the full history and looooove, that is also a foreclosure and is listed for $34900.
-- I have rented our current house for 5 years and have excellent rental history.
-- I am employed and have been steadily for 16 years.
-- We also have guaranteed income of over $700 a month.
-- I am a single parent, never married (if that matters).
That said, I'd like to buy a house if I can. The lender through which I had previously applied does FHA loans but I was still rejected for the house that was $80000. Would it make a difference if I asked for a loan for half that and was able to put up a 10% down payment or is it likely that the bank through which I applied is not able to loosen that credit score requirement at all? Is it even remotely possible that I can buy a house with my credit score or should I just give up on that and be happy to rent? From what I've read, FHA loans require a credit score above 500 but how do I find a lender that will loosen their requirements when the one I spoke to won't?
If I can't buy, what steps do I need to take to rehab my credit? As I mentioned, I have about $5000 in savings and can pay off some debt but I was advised that in addition to that I should also attempt to get a credit card with a low limit and pay that down monthly. Frankly, I'm highly opposed to that (I haven't had a credit card since I was in college 10 years ago and I really hated that damn thing) but I guess I'll do it if it'll help.
Any thoughts would be appreciated. We had originally planned to buy the current house we're in as an owner financing deal but it turns out my landlord is slightly crazy and incredibly greedy and was attempting to sell it despite the fact that it's locked up tight in a trust. I'd love to stay here and don't mind to rent this particular house (there are so many pluses to this specific house for us) but I have a feeling that if she can't sell it she's going to raise our rent astronomically high and it would be so much smarter for me to buy.
Any thoughts would be great...