Expert: Laurie Stephenson - 10/26/2009

Question
hi laura just a quick question . i found a home that i really like.But,however i have a few things on my credit report to resolve. in about 6 months it should be fixed i was told. can i put that home in contract? And how do a lender determine how much money can be lend after your credit is fixed to where you are able to get the home loan?                                          thanks alot!

Answer
Hello Judina,
Whew, not really a quick question! Let's take it point by point.
First I need to say that I am not an Attorney nor do I play one on TV! (LOL)

1. Any time you make an offer on a house the Seller will want to know about your ability to pay for it. In other words if it isn't a cash sale, do you qualify for a mortgage? In your case you have told me that currently you don't. While you may in 6 months, you don't now. If you put your self in the Seller's shoes, would you want to wait 6 months till the Buyer repairs their credit? That depends on the Seller's motivation to sell. Are they transferred and need to move in 60 days or are they just preparing to retire and have all the time in the world. Mean while, you could ask your Realtor to call the listing agent and present your interest and dilemma. See what the feedback is. If they are in a hurry they may say,"Don't bother making an offer" but if they have more time they may say, "Make your best offer and we'll see if the Seller is willing to negotiate with you". You should know however that this will put you in a weaker position for negotiating. You are asking the Seller to take his home off the market and wait for you. He will expect some compensation for that. For these reasons and others, I would recommend you wait till your credit is healthy and then begin your search from a position of strength. Once you have repaired your credit you will know exactly how much you can afford and you will have the ability to obtain a pre-qualifying letter from a mortgager that will let the Sellers know that you will be able to CLOSE on a home.

That leads us to the second part of your question.
2. A lender will look at the credit reports from the 3 main reporting agencies, to determine how reliable you are about paying your bills. They will look at your current salary, your length of employment at the same job, current debt load and payment history. Are you up to date with your responsibilities, or are you a late payer? Or a non-payer? Once they determine if you are credit worthy, the next step will determine how much (What amount) you will qualify for. That will depend on what loan program you try to qualify for. Conventional loans have very different criteria from FHA or USDA loans etc. There are percentage ratios that are guidelines that lenders use to determine which loan program to go with. Local banks or Brokers usually have working relationships with Realtors, and I recommend you ask your Realtor for a couple of referrals for a good mortgage officer.

3. This leads me to answer the part of the question that you did not ask, but I feel strongly that I need to say this for your own benefit. As an inexperienced Buyer I highly recommend you choose an experienced Realtor to represent you in the purchase. This is the most money you will spend on a single purchase. Wouldn't you want someone with knowledge and experience to help you get through it? To advise you all along the way? Realtors in NY State are paid by the Seller so the Buyer can be represented (usually) for no charge. Do yourself a big favor and find one you are compatible with.

I did say it wasn't going to be short...
Good Luck, I hope I've helped you!
Laurie
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