Expert: Jessica Bryan - 10/25/2006

Question
Thank you that was very informative. One thing I should have mentioned. I anticipate our credit scores going up moderately within the next 3 months or so (due to disputing some bills reporting as unpaid that were actually paid)Would you wait to pre-qualify or will they re-evaluate our credit when we get a more permanent idea of what we are buying?



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The text above is a follow-up to ...

-----Question-----
Husband and I are looking to buy in the next year or two. We want to buy in the Tulsa Oklahoma area. Right now I work in the medical field as a traveler and am grossing around $4,300 per month. My husband is a full-time student and does not have income right now. However our credit has some scars from the past. I was wondering if we should consider buying now since the market is so buyer friendly. Here is our stats.

*Gross Mnthly: $4,300
*Net Mnthly: $3,600
*car loan(April 2006): $16,000 excellent pymt history
*3 student loans: total: $5,000 exc. pymt hist.2+ years
*Discharged Ch7BK for me 12 months ago.
*Hubby has some past baddies but all are paid off now.
*I have one secured card for $200, zero balance, paid off each month(if used).
TOTAL MNTHLY BILLS: $510
* we could come up with about 3,000-5,000 off hand, and more when we get our tax refund in March.
* Both First time homebuyers.
* My husband is not planning to work for the next year to finish school
* I will be traveling for the year.

Median FICO's me- 540, Him- 580


Any suggestions? Buy now? Could we get qualified? Refinance later due to probable higher interest rate? Wait and buy later?


thank you!!

-----Answer-----
Dear Robyn;
You and your husband should first go to a lender and get pre-qualified. Determining how much you can afford is easy and very quick. Granted, you may not get the best interest rate based on the information you gave me but it will be apparent once you have spoken with a lender and it may still be better than paying rent. (Throwing money away)!  Once that happens you can talk to a real estate agent and see how the market is in the Tulsa area.  If there are some good properties at the right price I see no reason to wait to buy since the prices will only go up when the market begins to turn around.  Also, with interest rates still being low, you should try to secure a loan now.  Why throw your money out in rent when you can be building equity?  Even though you might be able to afford more later, there is no reason not to buy now and then leverage your equity later.  Most people find that they only live in their first home for a few years and then buy something more expensive anyway. For now, you can make slightly higher payments and when you have a better credit history you can refinance or move.


Good luck and best wishes.
Jessica Bryan

Answer
Dear Robyn;
If it is only three months, I would get pre-qualified now and start looking at homes.  By the time you find something and secure a loan your credit rating will probably go up. Or, in the event things haven't changed, in light of the fact that there are some pending issues, the underwriters may be more lenient. It all depends on the lending institution and the letter of explanation that is forwarded with the loan package. Often, a lender can assist you in improving your credit rating so don't hesitate to discuss this with the lender. In addition, starting to look at homes now will put you in a better position once you do have your pre-approval.  You will then be able to make a good offer with proof of a loan pre-approval.  Often, Sellers are reluctant to accept an offer if they are worried about the Buyers' ability to secure a loan.  I always advise my clients to submit a pre-approval letter from the lender with their offer because it gives them good negotiating power.

Good luck.

Jessica Bryan