+1 vote
My credit is very bad
asked Dec 23, 2017 in Second Mortgages by Va

2 Answers

+1 vote
Hi, and thank you for writing. I can see that you have a problem -- how can you pay rent and other bills while saving money for a down payment for a home? There are programs for people with this problem. However, if your bad credit is the result of poor financial management, you are unlikely to be eligible for this assistance -- yet.

If you live in a rural area, for instance, and have very low income, you could buy a home with nothing down and a "direct" loan from the USDA -- a loan with longer terms and subsidized rates direct from the government. But in almost all cases, you need a 640  or better FICO score to be eligible.

The good news is that bad credit is not forever. And honestly, learning to manage your money and save some money will make you a lot more likely to be a successful homeowner. I recommend professional help in the form of a reputable NON-PROFIT consumer credit counselor. You need to learn to budget and pay your bills on time and not overspend.

Second, figure out what an affordable house payment would be for you. (We have a calculator for that on The Mortgage Reports https://themortgagereports.com/mortgage-affordability-calculator).

Third, "practice" for homeownership. Say for instance, that your current rent is $600 a month, and that you want a house that would cost $800 per month. Start putting $200 a month into a savings account for your house. You want to make sure that you will be comfortable paying $800 a month and having $200 less to spend on other things. In addition, this will help you build up more savings for your down payment, closing costs, or just an emergency fund. And regular savings can be used to show lenders that you have learned to manage your finances better. All good things.

You probably didn't get a bad credit score overnight. And it won't magically improve overnight either. But your most recent history counts more than the old stuff, and every month that you pay your bills on time helps boost your score.
answered Dec 24, 2017 by GinaPogol (47,650 points)
edited Dec 25, 2017 by GinaPogol
0 votes
I would wait until you have some money saved. VA and USDA LOANS have 100% financing. However, there are always costs when buying a home.
answered Feb 7, 2018 by GustanCho (106,540 points)

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