Bad Credit Mortgage in Colorado….is it possible or should we just file Bankruptcy?

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We are looking to purchase our first home in the Denver area in about a year. We both have bad/old credit(both of our credit scores are below 600) Our income will be around 75k(I am finshing up nursing shool)

We are trying to see if this is even possible or if we should just be content renting for several more years.

We are expecting a higher interset rate. I have heard of “B loans” & “sub prime lenders” and have been trying to look into them.

We are trying to decide if we should just file bankruptcy now and see if our credit gets better or if it is possible to get a loan?

Will we need 20% down with this bad of credit, or can filing bankruptcy help that?

  1. Reply
    January 20, 2011 at 11:41 am

    Filing for bankruptcy will make your credit rating much worse.

  2. Reply
    Debbie Parks
    January 20, 2011 at 12:38 pm

    First of all 600 is not that bad. It depends on why your score is 600. Only if your score is under 500 are you in serious jeopardy of not being able to qualify for a home loan. I would have to see your credit report to advise you exactly how to raise your score but a 620+ can get you a 100% loan and your income is very realistic as well. I don’t know why you are even considering BK. You didn’t give a reason. BK will prevent you from getting any credit at all! BK is a last resort. Your best bet is to contact a loan officer/broker and let him pull your credit report and do a financial analysis for you or a “pre-qual” to let you know exactly how much of a home loan you can qualify for. I would be happy to assist you with this. Theres no charge or obligation.

  3. Reply
    January 20, 2011 at 1:03 pm

    No bankruptcy wont help. It sticks for 10 years on your record.

  4. Reply
    January 20, 2011 at 1:09 pm

    Filing bankruptcy won’t help your chances of getting a mortgage, but it will give you a fresh start.

    There are a lot of misconceptions about bankruptcies. First, file Ch 7 not Ch 13; why prolong the agony? Second, it won’t necessarily hurt your credit. You have horrible credit now; how much worse can it get? Third, file Ch 7 and keep all your accounts current up until the day of discharge, regardless of what your BK attorney tells you. I’ve seen people walk out of a discharge with 650+ credit scores that way.

    Now, if buying a home is your main goal, you have some good advice above. You can qualify for 100% financing with scores as low as 580. You will be in the B-paper or subprime category, probably looking at rates in the high 8s or 9s, but that’s the price you pay for bad credit. Get a 2 year ARM, file bankruptcy and reaffirm the mortgage, then refinance when the discharge is two years old and you’re eligible for Fannie Mae A-paper rates.

    Rick Lanicek

  5. Reply
    January 20, 2011 at 1:10 pm

    Filing for bankruptcy won’t help your credit score… it will make it worse. Keep renting, repair your credit. Talk to a loan officer at a bank or credit union about how to improve your credit. Take their advice.

    Loans are based on several things. Your credit history, your length of employement at your current job, your debt-to-income ratio, the value of the collateral (in this case property) compared to how much you want to borrow, AND your ‘character’ as perceived by a loan office.

    You don’t always need 20% down payment… sometimes that amount can be a second loan.

    Bankruptcy is not for ‘convenience’ sake. It is SUPPOSED to be for those who can’t repay their debts due to some significant situation which IS BEYOND THEIR CONTROL. It will NOT improve your credit rating. It will NOT improve your chances of getting a loan and it will NOT improve the terms of any loan you get.

    Repair your credit rating. You created it yourself…fix it yourself. It can and has been done.

  6. Reply
    Screaming Eagle
    January 20, 2011 at 1:14 pm

    at 75K per year you are not doing too bad.

    Work with the credit companies to work out a deal, but not with those rip-off credit salvage agencies. Sometimes you can get them to remove bad things from your credit if you work out a deal to pay them off, or at least pay a reasonable amount. Sometimes not, but it is worth a try.

    Start putting the maximum into your retirement accounts. Especially Roth IRAs. Put it in regularly and monthly for a few years. I believe you can take out your contributions for a down payment on a first home purchase or for some financial emergencies. It is also protected from creditors in the event of a bankruptcy, but you you have to be contributing regularly for at least a year before you file.

    Discuss your situtation with a bankruptcy attorney. Initial consultation is usually free, and they usually can help with credit problems and work with your creditors for you. Even if you don’t file for bankruptcy protection.

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