Dec
13

How important is your credit score when attempting to purchase a house?

Purchase house
by wallyg

Question: How important is your credit score when attempting to purchase a house?
I want to purchase a home with the lowest down payment required. My credit score however isn’t that great. My finances have now bounced back and I have been paying-off collections, ect.    My credit score is kinda low due to my past. Step by step, what should I do?

Best answer:

With tarnished credit your best choice would be an FHA loan. FHA requires a 3.5% of the sales price as down payment. FHA still does not require a minimum credit score. But individual lenders Do!Most are sticking with 580+. Some are going as low as 500, but require a higher down payment.  Assuming that you have not had a foreclosure or bankruptcy within-in the past 2.5 years. To get started Pay-off any judgments and/or collection. Try to pay down some lines of credit (Credit Cards). Do not confuse paying down or paying-off with closing the account. One factor that determines your credit score is the number of lines of credit you have and how long they have been open. Bring any ongoing monthly expenses (Insurance, utilities, etc.) current. Taking those steps should bring your credit score up. 

In the State of Virginia there is a program called the VHDA/FHA Plus that is designed for first-time home buyers or for people who have not owned a home for at least 3 years.                           The qualifying ratios are a little tighter than regular FHA but you can buy with No Money Down.

Your credit score needs to be at least 620+. No recent late-payments, judgments and/or collection. If you have some old judgments and/or collections pay them off!

This program is a collaborative effort between VHDA (Virginia Housing and Development Authority) & FHA (Federal Housing Administration). The 1st trust is an FHA loan for 96.5% of the sales price and the 2nd trust is a loan for 3.5% of the sales price. Unlike the no money down Arm’s of years past. These are fixed rate loans that have interest rates that are competitive with ordinary FHA loans  that require 3.5% in downpayment.  

National Association of Realtors

 

Know better? Leave your own answer in the comments!