My father and I trying to buy a house

minalegend · Joined: 20 Jan 2008 Posts: 4

My father and I are trying to buy a house. We are tired of paying rent.

I researched online and found houses 1 bedroom which is ok with us ranging from $89,000 to $135000 In north Jersey.

We applied before for a loan but was denied.

Now we have $6000 to put down for a house

Our total income is $2140 Monthly

Credit scores
My dad 540
Mine is 515

Does anyone think we can qualify for any loan out there?
If yes please provide information. If no please give suggestion of what should we do.

All the debts on my credit history is paid off. It just takes time for score to go back up. and My dad has a small debt of about $2000

liverichly · Joined: 10 Feb 2005 Posts: 195 Location: Orange County, CA

Debt to income ratio is going to be too high for the $135k sales price, but is probably fine for the $90k sales price. Debt to income ratio is your total monthly payments (credit cards, car loans, student loans, personal loans, mortgage payment, etc.) divided by your total monthly income ($2,140). Lenders want you to keep that figure to 45% or below, but debt to income ratios up to 64.99% can qualify if there are compensating factors (good reserves, good credit, significant down payment).

What is the payment on your dad's debt of $2k?

What is on your credit that is bringing you and your dad's scores to the 500's? Will need to know what is on credit, if it's still owing, if so how much is owed, and when it was.

What type of loan did you apply for and what was the reason they gave for denying?

minalegend · Joined: 20 Jan 2008 Posts: 4

well the payment on the debt right now is only $28 a month.
And the reason why our score is so low because we had a lack of payment for the credit cards we had andthey sent us to collection but we paid all of them except this only one that we have left.

But again it takes time for the score to go back up. Maybe by the end of january it will go up. We just finished paying off the debts that we had before.

minalegend · Joined: 20 Jan 2008 Posts: 4

the loan we applied for is a purchase loan from lender tree.

liverichly · Joined: 10 Feb 2005 Posts: 195 Location: Orange County, CA

Well it sounds like your debt to income ratio would be fine up to around a $100-115k home, depending on property taxes & homeowners insurance amounts.

FHA could be an option for you. Do you know if LendingTree tried to approve you for FHA?

When did each account go into collections? That would determine if FHA is a possibility. FHA generally wants clean credit for 12 months... so if the accounts went into collections over 12 months ago, and since you've made good on the debts, and obviously have corrected whatever lead to you not being able to pay the credit cards when they were owed, and have re-established credit, then you would be a good candidate for FHA. FHA requires 3% from you, and will permit the seller to pay up to 6% of the sales price towards your closing costs (you have to negotiate with the seller to pay your closing costs).. so your $6k could very well be enough.

minalegend · Joined: 20 Jan 2008 Posts: 4

some of the debts were sent to collection in mid 2007. and some in the end of 2006

I am not sure if lendingtree tried FHA

liverichly · Joined: 10 Feb 2005 Posts: 195 Location: Orange County, CA

Since FHA is going to want clean credit for 12 months, and you said some were sent to collection in mid-07 (as in ~6 months ago), you are likely going to have to wait until 12 months after the last collection account popped up before that is an option.

I would love to say that FHA is just one many options that could potentially work out for you, but that wouldn't be true. Mortgage loan programs have really tightened up their guidelines in the last 12-18 months, loans that were once easily done just a year ago wouldn't even have a chance today... probably shouldn't even been done a year ago in my opinion but that's another topic in itself.

FHA isn't a new product, it's actually been around longer than my parents have been alive, but over the past 5-6 years there were programs that could approve potential homeowners more easily than FHA come out, and so FHA was largely forgotten.. however since largely all of those loan programs have gone away, FHA is one of the only loan programs that can qualify potential homeowners who have low scores & small down payments. The catch is though, is that you need good credit history for 12 months (24 months from most BK's & 36 months from foreclosure)... so that is where you sit, just being 6 months out from that being a realistic option for you.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Well, one caveat to all of that.

FHA is big on profile and why. If you can document that you have kept payments up on your rent and other alternative trades, and that the credit that went poor was due to an extenuating circumstance (usually something medical related) then you may have a possibility, although as LR mentioned, 12 months is the preferred amount of time.

If you can keep your credit clean for 12 months, you'd probably fine.

The other concern I would have for you is that you need to know how much actual cost there would be for purchasing a home. I've done done some loans in your area and they are not even remotely cheap. You could be looking at $4,000 just in costs, and having to come up with your down-payment money over and above that.

FHA does allow you to receive your down payment money via a Down Payment Assistance Program like Genesis or Ameridream, which is funded by the seller. You can also have your closing costs paid for by the seller, or partially. Familiy members are able to contribute as well.

For more information about FHA visit www.hud.gov.