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How To Buy a House, Even With No Savings And Bad Credit

Written by Jaymi Naciri on Wednesday, 26 February 2014 10:21 am
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Close More Deals - Qualify homebuyer leads fast and free

Sure, you'll buy a house. Just as soon as the money truck dumps a big load of cash at your front door. And the credit fairy sprinkles a whole bunch of that magic dust on some numbers that aren't even close to "qualifying" levels.

That's a common response to the idea of buying a home. The desire is there, but perhaps not the ability.

Or so you think.

"Many people have no idea they can buy a home so they don't even consider it," said Kevin Pierce, a leading mortgage loan originator with HomeBridge Financial Services. Perhaps they don't have a down payment or their credit isn't perfect. But the truth is that with a little time, work, and patience, homeownership can be a reality, not a fantasy. You just need the right people in your corner."

Pierce recounts a story about a client who went from "unqualified applicant who was desperate to buy" to "homeowner" in six months. "He really wanted it, and she worked hard to save while we worked together to improve her credit," he said. "Now he has a home of her own whereas before she just had a dream."

Down payment assistance

Well that's nice, you say. But what about the down payment?

That big chunk of cash is what stands in the way for many people. But available programs on the city, state, and federal level can help.

"If you qualify for a conventional loan (the least-expensive type, which conforms to tougher rules written by giant mortgage companies Fannie Mae or Freddie Mac) you'll need a down payment of at least 5 percent," said CNN Money.

For a Federal Housing Administration (FHA) loan, the most common loan type for first-time homebuyers, the minimum down payment is 3.5 percent. "However, a number of nonprofits can help middle-income buyers with down payments," said CNN Money. "Some buyers are able to get a home with no down payment at all."

California's CalHFA program "offers a variety of loan programs to help" people purchase their first home, with income requirements that vary per county. In L.A. County, for instance, the income limit for a single individual to qualify for CA state assistance under the program is $52,150. For a family of four, that number is $74,500. For more information about California programs, visit CalHFA.

The U.S. Department of Housing and Urban Development's (HUD) website has a state-by-state list of programs.

Individual cities, like Plano, TX, have financial assistance programs for low to moderate-income buyers buying within that city. Financial assistance is "in the form of non-repayable grants." For more information, click here.

There are also federal programs like the Federal Home Loan Banks' Affordable Housing Program (AHP), "one of the largest private sources of grant funds for affordable housing in the United States." See FHL Banks for more information.

A knowledgeable lender will be able to tell you how much you need to come up with for your down payment and recommend any available grants or assistance programs to help offset the costs.

Closing Costs

So now that you've figured out how to get your down payment taken care of, it's time to think about closing costs. Closing costs can be one of those unexpected expenses that sneak up and bite you if you are not prepared. They range between two and seven percent of your loan amount - but before you freak out and decide you're definitely not homebuyer material, there are ways to get help here too.

  • Assistance programs that offer down payment funds often allow funds to be used to pay closing costs.
  • Depending on the strength of the real estate market in the area in which you are buying, the seller may kick in closing cost assistance.
  • A good lender may be able to figure out an equation within your particular loan parameters to offset closing costs through a credit.

"The saying is 'buyer beware,' but with first-time buyers, a lot of the time it's more like 'lender be aware," said Pierce. "If you are working with a lender who is isn't knowledgeable about different assistance programs that can help you purchase a home, or is unwilling to help you find out, perhaps it's time to move on to a new lender."

Credit

Now comes the hard part for many people, because credit worthiness is often the one area where getting from A to B might be out of their hands.

MSN recommends addressing any credit problems a full year before applying for a mortgage, ordering your credit report, dealing with debt, and working on any credit scores that won't meet qualification minimums; for an FHA loan, don't expect to qualify with anything lower than a median score of 620 on the three credit reports (Experian, Equifax, and TransUnion). The higher the median score, the more likely it is you will qualify without extra effort and the better your interest rate can be.

If your scores are low, it's time to go on the offensive. And, unfortunately, repairing your credit isn't as straightforward as it should be, whether the issue is errors on your report or boo-boos you need to make right.

"The world of credit repair is complicated and frustrating and often makes no sense whatsoever," said Pierce. "It's not for the faint of heart, and it's probably not for buyers to take on by themselves unless they have endless time, patience, and knowledge of how the system works. Buyers really want to make sure they are working with a lender who has experience in this area and who can guide them in the right direction."

Success stories are out there - just ask the desperate homebuyer who raised his score by 145 points in six months. And so are happy homebuyers, even those who one day thought they'd be renting forever and the next were on their way to the American dream.

Especially those.

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26 comments

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  • Comment Link Mrs Caroline Theo Wednesday, 27 May 2015 10:10 am posted by Mrs Caroline Theo

    Hello everybody,
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  • Comment Link Jerry Scott Monday, 25 May 2015 11:13 pm posted by Jerry Scott

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  • Comment Link Joaquin Monday, 11 May 2015 10:23 am posted by Joaquin

    Could I buy a house no money down fair credit and one poor on the because I got three bankruptcies should have been gone been past 10 year foreclosure and 2repole had very bad luck thatyear

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  • Comment Link low interest loans Saturday, 02 May 2015 9:34 pm posted by low interest loans

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  • Comment Link Jason Rappaport. Wednesday, 01 April 2015 6:22 am posted by Jason Rappaport.

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  • Comment Link Kep Wednesday, 25 March 2015 9:18 am posted by Kep

    I wouldn't trust anything from that crook Trudeau, bad advice. Do the research folks, or you may be sorry. After all, I don't know anyone who is as ALL knowing of ALL things like that con Trudeau.

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  • Comment Link Mark Williams Sunday, 28 December 2014 9:29 pm posted by Mark Williams

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  • Comment Link Kelsi and Todd Davis Monday, 15 December 2014 2:53 pm posted by Kelsi and Todd Davis

    After trying to buy a house in may of this year our loan officer recommended mycreditpi.com. We signed up for there Credit Analysis and our scores were 620 and 590. In Aug our scores were 710 and 690. We closed on our house in Sept, they did an excellent job we were very happy.

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  • Comment Link Javier Sanders Tuesday, 09 December 2014 4:00 pm posted by Javier Sanders

    Its nearly impossible if you have a under the minimum wage job knowing you over qualified for a position being filled for a company you are trying to work for example. I worked at Tiger Direct as a computer Tech my hourly base pay was 10 an hour and my weekly hours are 12 with bi weekly pay. ?????????

    Report
  • Comment Link jamesudib Sunday, 16 November 2014 9:25 pm posted by jamesudib

    What's wrong with renting??

    People should save their money until they have 20% or more. Cash only is ideal! Learn from the past people!

    Of course they look at me like I'm crazy when I suggest they cut a $100+ a month cable bill. Or drive a car that is 3 years old. Or only fill up their tank from the cheapest place according to GasBuddy. Or get $25/month budget car insurance from 4AutoInsuranceQuote. Or cook their own food instead of spending a hundred a week on restaurant food (or far more if they like the bar).

    You live exactly like people did in the 1970's, and suddenly there's tons of money. Usually moderate earners can save $500 a month on these types of luxuries. May not seem like much, but it's usually the difference between being in financial trouble, and at least not losing ground.

    My point is that it's so odd that people seem to forget all the little things we have, buy, use - that they didn't in the "better" times. That stuff isn't free.

    Report
  • Comment Link SANDI Thursday, 06 November 2014 7:25 pm posted by SANDI

    HI EVERYONE READING THIS COMMENT .THE GREAT ADVICE I CAN GIVE IS GET YOUR CREDIT REPORT AND MAKE SMALL ARRANGEMENTS TO PAY TO MAKE YOUR CREDIT SCORE GO UP. ANOTHER OPION WOULD BE GET A SECURED CREDIT CARD .MAKE PAYMENTS ON TIME TO BRING UP YOUR CREDIT SCORE. GO TO CREDIT REPAIR.COM/CARD. KN0WLEGDE IS POWER AND IT CAN BE YOURS. READ THE BOOK"DEBT CURES ,THEY DONT WANT YOU TO KNOW ABOUT" BY KEVIN TRUDEAU. IT SHOWS YOU HOW TO CLEAR DEBTS AND BRING CREDIT SCORES UP.

    Report
  • Comment Link Kristy Canizio - Unlimited Solutions, Inc. Thursday, 30 October 2014 9:05 am posted by Kristy Canizio - Unlimited Solutions, Inc.

    Please email your contact # to info@unlimited-solutions.org to speak with our credit expert and receive a free, no obligation consultation.

    Report
  • Comment Link Patricia Cook Tuesday, 28 October 2014 10:19 pm posted by Patricia Cook

    I have sent you an email. I could use a little help and guidance.

    Report
  • Comment Link Kristy Canizio Thursday, 23 October 2014 10:13 am posted by Kristy Canizio

    Andrew - I will send you an email today with the info

    Kristin - Please email me with your contact information. My email address is info@unlimited-solutions.org

    Report
  • Comment Link Kristin Brown Tuesday, 23 September 2014 6:07 pm posted by Kristin Brown

    I have bad credit due to hospital and doctor bills and other stuff. My husband has low credit around 540. We r living with my mom and trying to save money. But it's been a real struggle since my daughter is special needs and has to have medication everyday. Life is extremely hard to save money. I am at a hard spot. I don't know how to fix my credit where we don't have to pay a ton of money to get it fixed. Is there a way to get help without it breaking the bank. We need our own place.. please any help would be wonderful

    Report
  • Comment Link Andrew Hubbard Wednesday, 17 September 2014 2:58 am posted by Andrew Hubbard

    This all sounds great, and I will definitely be looking into it, but I am curious about the whole credit thing. You see, in my case, it is not that I have bad credit, it is that I have NO credit; I have tried Credit Karma to get my credit scores, applied for credit with several different stores or cards, and the answer is always that I have "insufficient credit history" to get it. To make matters worse, I am on Social Security Disability and only get $920 per month, which is barely covering my rent right now as I have been able to find no apartments that suit my needs, and DEFINITELY leaves me unable to pull together any kind of savings. For reasons I won't get into here, I need to move to either Texas (preferably the San Antonio area as I have friends and family there) or Colorado, but I cannot afford to travel to either beforehand to scout different homes or find a realtor that would have the knowledge you are speaking of for assistance programs, lenders, etc. So, my question is, with non-existant credit, low income, and no savings, AND the need to relocate as soon as humanly possible (like, before the end of the year), what should I do? Can credit repair fix "insufficient credit history" and all that? If someone can tell me who I need to talk to, please email me at animeotakuwitch@gmail.com

    Thank you for your time and assistance,
    Andrew Hubbard

    Report
  • Comment Link Kristy Canizio Thursday, 14 August 2014 9:49 pm posted by Kristy Canizio

    My company has partnered with an incredible national credit repair company that is successful in having foreclosures, liens, judgments, bankruptcies, late payments (including late mortgage payments), repossessions, charge-offs and collections removed from credit reports in less than 30 days!

    If you have clients that are having issues with getting financed or know of anyone who needs to repair their credit, please email me at info@unlimited-solutions.org

    Thank you for your time,
    Kristy Canizio
    CEO/Owner
    Unlimited Solutions, Inc.

    Report
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