Bad credit question (!)
Question: My wife and I are starting the process of buying a house soon.
On the surface we’re right for the size loan we’ll want ($60,000 or so): we make around $50,000/yr combined, have savings, investments, will make 15-20% down on the home. Her credit is spotless; mine not so much. A few collection agency accounts (I can take care of those) and one big one: a government debt that has been charged off ($6700).
I know this debt won’t help. Any ideas how much it may hinder things? Would a cosigner on the loan help (Dad’s a retired doctor)?
Answer: Can’t answer your questions directly but here’s a thought. If you do run into trouble securing traditional financing consider looking for a seller who’s willing to offer you a land contract. Under this arrangement you make payments of principal and interest direct to the seller and they retain an interest in the property; the seller’s incentive for dealing with people with less-than-perfect credit is that the contract does give them the right to simply repossess the property should you fail to make timely payments, i.e., you lose everything you’ve paid.
Oftentimes people will enter into this kind of arrangement for a limited time, and then when they’re got a prompt payment history and potential equity in the property they can pay off the seller through securing a conventional mortgage.
This is not intended to be a complete explanation of this type of financing, just to give you enough of an idea to see if you’d like to investigate it further. All in all these arrangements are distinctly *not* to the advantage of the buyer, but sometimes they’re the only way people can get a foot in the door, so to speak, of home ownership.
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