qualify for mortgage?
Question: I have gotten into big trouble with my credit cards. I am currently working with credit counseling to negotiate lower terms for all six of them. Many have already been handed over to collection agencies as they are 6 months past due. Not that it matters, but I “had” a gambling problem. My question is this:
I want to sell my condominium in about 1 year and buy another less expensive condo in another part of town. My current mortgage is $150,000 at 6.8% and I pay it on time. The new mortgage will hopefully be about $25,000 less. How difficult will it be for me to qualify for another mortgage because of my tarnished credit report? I hope to profit about $50,000 from the sale and use the proceeds to pay down my debt, credit cards included. Next, if I don’t qualify on my own would a co-signer help the situation any? Thanks, so much!
Answer: Your credit record it toast for about 10 years. The key thing is your FICO score, and I have little hope that it will qualify you for a conventional mortgage. A co-signer will help, but you will likely still be paying a higher interest rate as punishment.
You may have options with a low-doc or no-doc loan. This will take something like 40% down, so you will need that $50K as a down payment.
I do, however, like your plan. Downsizing to raise cash to pay off debts is the responsible thing to do, and hopefully, it will be relatively painless for you to do (other than the pain of moving).
The only thing that I can think of is to visit a mortgage loan company right now, and find out first hand where you stand. That gives you a year to fix what you can, and come up with a plan. You may end up looking at “brokered mortgages”, which is a higher risk category, so talk with a real estate agent that you know and trust to get a referal to a mortgage broker that can be trusted. There are a lot of shady people in that business. There were a couple things in your post I didn’t understand. What’s a low-doc loan? And what does “brokered” mortgages mean? DH and I have flawless credit and got our latest mortgage through a broker recommended by our realtor. The interest rate was very favorable and the whole process was accomplished with one short phone call. This was a lot less hassle than the previous mortgage, which DH wanted to get through a bank he’d done business with for years. There was no actual problem there, just a lot more forms to fill out, documentation required, etc.
To the OP: even if your credit is indeed toast another option that might be available to you is seller financing, which typically might last not more than 5 years but would give you additional time to repair your credit and become eligible for conventional financing.
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