570 credit score, $0 down, first-time homebuyer. Is homeownership realistically possible for me?
>570 credit score, $0 down, first-time homebuyer. Is homeownership realistically possible for me?My wife and I are trying to figure out if becoming first-time homebuyers is even realistic for us, and I’m looking for honest advice from people who have been through it.
>Current situation:
>Credit score: around 570
>Down payment saved: $0
>First-time homebuyer
>Located in North Carolina
>No previous homeownership experience
>I keep hearing about FHA loans, USDA loans, down payment assistance programs, grants, etc., but it’s hard to tell what’s actually realistic versus marketing.
>My questions are:
>Is it possible to buy a home with a 570 credit score?
>Are there legitimate programs that help with little or no money down?
>What should my first steps be if I want to buy a home in the next 1–3 years?
>Should I focus entirely on improving my credit first?
>If you started in a similar position, what did your timeline look like?
>I’m not looking for someone to tell me what I want to hear. I’d rather hear the hard truth and build a realistic plan.
>Any advice, experiences, or things you wish you knew before buying your first home would be greatly appreciated.
>Thanks everyone.
I took this from a more active sub and thought I'd give my advice on it.
I'll cover two aspects:
- improve credit
- $0 down
First piece of advice would be to improve your credit.
I'd fix your credit in this order (highest impact first. This is from the first time buyer guide I wrote)
- Review and correct any mistakes.
- If there’s an account that shouldn’t be there, and is negatively impacting your score, then ask the credit bureaus to remove it.
- Pull your report at annualcreditreport.com
- Catch up on late payments (payment history is the highest weighted factor)
- Ask for pay-for-delete on collections.
- If you have a collection, then ask them to delete it. “If I pay this, will you delete it as if it never existed and provide me with a letter of deletion?”
- This will get rid of the collection account as if it never existed. Remember, ask if they'll delete the account if you pay it off. Not just mark it as 'paid.'
- Pay down credit cards below 30% of the limit
- This helps the utilization aspect of your credit report
- If you can’t pay it down, consider a consolidation loan. A consolidation loan pays off your high credit card debt and places it in an installment loan instead. This lowers your utilization and will likely have a positive impact on your credit score. If you do this, review the terms carefully. “Thar be loan sharks in the water.”
- One thing you should consider is your own discipline. If you get a loan to pay off your credit cards, are you going to use that credit card again and bring the balance back up? Don’t do it if you’ll go back to old habits.
- Add a secured credit card (if needed)
- Secured credit cards are credit cards that are backed by money in a savings account. Credit Unions offer them generously because there isn’t risk when it’s secured with money.
- Use the secured credit card wisely. If you pay late, then this won’t have helped at all. If you use more than 30% of the available limit, then it won’t help much either.
- Stay current and give it time.
- It may take up to 6 months to finally see the positive effects. Keep your credit card balances low or paid off. Keep paying your bills on time.
Then there's the $0 down aspect I want to cover here too
There are $0 down programs, and there are down payment assistance programs.
You'll need at least 620 credit score for most programs, and some have a much higher minimum score.
(this is also from my first time buyer guide)
Down payment assistance
These local down payment assistance programs come in two forms:
- Grants
- Loans
A grant is basically free money. If you qualify under specific restrictions, you get it.
If it isn’t a grant, then it’s a loan. There are three types of loans that the program might offer:
- Repayable, with interest
- Deferred, no interest
- Deferred and forgivable
Repayable With Interest
A repayable loan works how most loans work. They give you an amount to cover your down payment, and sometimes your closing costs, and you repay the amount in monthly increments while being charged an annual interest rate.
I’ve seen programs where the interest rate is lower than normal market rates, but I’ve seen other programs where the interest rate is higher than typical market rates.
I’ve seen programs where the repayment term is 10 years and others where the repayment term is 30 years.
Each program’s offer will vary.
Deferred Without Interest
If you were to compare this type of loan to cancer, then you’d call this one benign.
It doesn’t grow with interest.
These types of loans only come due when you refinance or sell the home.
If your home has appreciated enough, you may be able to include the loan amount in your new refinanced loan without paying it out of pocket.
When you sell, the loan is paid off with the proceeds of the sale.
Deferred and Forgivable
Not only are these loans at 0%, but they may forgive the amount they’ve loaned you. It usually comes with a qualification.
A common qualification is living in the home for a certain amount of time. Three years is common, but I’ve seen programs push it as high as 10 years.
If you move out just shy of meeting the forgivable period, you may be in luck. Some programs will forgive it in pieces.
For example, if you were loaned $10,000 with a three-year forgivable period but moved out in year two, the program may forgive 33.3% of the loan for each year.
So instead of owing the full $10,000 back, you may only owe $3,333.33.
The guide I’ve built out for all 50 states isn’t all-inclusive. I may have missed some. It also doesn’t take into consideration some national programs that exist.
If you’d like help determining which route might fit you best, visit newbhomebuyer.com/dpa, and someone will help you compare these programs side by side.
$0 Down Programs
Rather than assist you with the down payment, some lenders will forego the need for a down payment completely.
Here’s the list:
- VA mortgages
- USDA mortgages
- Portfolio loans from local banks
VA Mortgages
VA mortgages are strictly for eligible military veterans.
USDA Mortgages
USDA mortgages are strictly for rural areas. Here’s a map to show you which areas are eligible:
eligibility.sc.egov.usda.gov/eligibility
USDA loans also have income restrictions. The income restrictions are specific to the county and to household size. The more kids there are, the higher the income limit. On the same link as the map, there’s also a section to check if you make too much money.
Remember: this takes into account household income. So if there’s an adult who isn’t on the loan but is earning an income, that income must be considered as part of the overall household income.
Portfolio Loans From Local Banks
$0 down payment portfolio loans from local banks are determined by the local bank or credit union. It’s their loan, so they make the rules. Here are some common rules they put around these loans:
- Higher minimum credit score
- For first-time buyers only
- Lower debt-to-income ratios
- Purchase price/loan amount caps
One common benefit of these types of loans is that most of them will not charge a mortgage insurance payment. Double-check this as you explore those programs.
Hopefully this helps.
Sam
I write first time homebuyer tips at r/NewbHomebuyer
