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passmeby · Feb 17, 2008, 04:13 PM

We have found a home we want to purchase and use as our primary residence. The home is listed at $79,000. We have bad credit (in the 400's, which is about the same as where our credit was when we bought current home). What are our chances of getting a loan for this home? How much would our chances improve with a downpayment of 5%? What size of a downpayment would "seal the deal"? We own a home currently that we plan on selling, and the mortgage is current, though it has been paid late on a few occasions in the past.

Please, any help on what to expect when applying! I don't want to think it's impossible, and at the same time, I don't want to get my hopes up too high. We can qualify to apply for a VA loan if this changes anything. We have an FHA loan now. Any input is appreciated.

Edit: Would additional income play an important role? What about a co-signer, with a 5% downpayment? Regarding a co-signer, how long would the loan have to be paid regularly in order to remove the co-signer? How much does having a substantial downpayment and/or a co-signer bolster the application?

Fr_Chuck · Feb 17, 2008, 05:26 PM

Most of the sub prime lenders have went out of business ( bankrupt) or stopped doing sub prime mortages. So people who could get a loan 2 years ago, will be lucky to be allowed to fill a application out today.

So your chances are slim to none just to be honest.

Best chances, talk to your current lender and see if they would approve you for a new loan, if you sell your current home.

How much profit will you get from your current home sell ?

Co-signers can not be removed, they will be liable for the loan until it is paid off.

Substantial down payment with credit score in the 400's, at least 10 and most likely 20 percent.

and how long can you make two home payments, if it takes a year or more to sell your current home?
I just sold off my homes ( all of my rentals and main home) I was selling at almost 20 percent under appraised value on our main home, and it has been on the market for over 7 months, All of my rentals have sold and I now finally have a contract on my main home but at about 30 percent under value.

passmeby · Feb 17, 2008, 08:43 PM

I'm not sure exactly how much profit we will get from selling this home. It won't be too much, between $5 and 10k, all of which would go to a downpayment.

So, say I could make a downpayment of 15%, would my chances be good for getting the new house? Just to add, this new home is worth more than what it's selling for. Will that factor in?

Just curious, with horrible credit, is there pretty much a guarantee of a loan if I can make a certain amount of a down payment?

Also, since the home is worth more than the asking price, it wouldn't be too hard to refinance it shortly after purchase, right? And doing that, the co-signer (if any) could be removed, as it would be a new loan, right?

Fr_Chuck · Feb 17, 2008, 08:53 PM

No, with bad credit today, ( a lot different than 2 years, even one year ago) bad credit is hard to get placed, a few sub prime lenders still doing some, but will be looking for credit esp last year, how you where paying on your current home and/or rent. And also your income to debt ratio.

15 percent down will most certainly help a lot. If you used a good mortgage broker on your last loan, I would talk with them and see the market is doing right now.

passmeby · Feb 17, 2008, 09:42 PM

Thanks for your answers Fr Chuck. I did have a good mortgage broker on my last purchase, but unfortunately we can't use her again as we're buying out of state and she's only licensed for this state.

I will just go for it, and try to get this house with 15 to 20% down and hope for the best. I also found a couple HUD programs that might help, I am waiting to hear back on the details and requirements.

If anyone else has anything to add to this, please do. I am most definitely open to any other tips and ideas, and any other help and resources. Thanks!

passmeby · Feb 18, 2008, 10:27 PM

OK, I spoke to the realtor today and found out that the home on the property is not liveable and would need a bit of work to be fit for habitation. So, I've got a long hard road ahead, but I am not letting it discourage me. I have been looking into many kinds of programs like Farm Credit and smaller banks in the local area.

Does anyone have any other tips on where to look for help besides HUD and Farm Credit? I'm still waiting to hear back from these agencies. A broker will not be able to help in this situation, as it's not considered a residence exactly, so no mortgage is possible, I have to find alternatives to that.

Thanks again.