Expert: Jessica Bryan - 8/25/2004

Question
   My wife and I do not have very good credit. Our current credit score is about 585. We own a home that is older, that is in another state. We will profit about $50,000.00 on the sale of this home. My question is this: If we go to a creditor with a $50,000.00 down payment on a home will that help us overcome the issue of our credit. For you consider of our question, base it on a purchase of a home in the $125,000.00 range. Also our credit report shows that we were late on some of our payments a few years ago and that we have to much debt on our credit cards and other things. We plan on paying off the majority of these before buying this home. Our income is about $85,000.00 per year. Also how would this effect a mobile home purchase of a lessor amount.

Answer
Dear Darryl;
When putting over 30% down on a home purchase there are loans that require little or no documentation.  This, however does not include credit issues.  Anyone who lends you money wants to know how reliable you are at paying back.  If you put more money down the thinking is that you will probably not walk away from the loan since you have quite a bit of your own money tied up in it.  However, the loan you get will have a higher interest rate than one you could get if your credit score was higher. This is industry wide policy. You will have to have the lender calculate what your monthly payment will be on this kind of loan.  The lender will also be able to tell you just how much of a loan you can qualify for (and therefore how much you can afford to spend on a house) based upon the interest rate that effects your monthly payment. The worst case scenerio is that you will pay more for your house payment but plan on refinancing when you build better credit.

My suggestion is for you to contact a lender right away...give them your credit score and see what program they have.

Good luck and best wishes.

Sincerely,
Jessica Bryan
Managing Broker
House to Home Realty Services