Loan Officer Answers The Web's Most Searched Questions

Certified Mortgage Advisor
NMLS 1701021
February 22, 2021

Let's learn to buy a home

Today I'm going to answer your home buying questions. So we're learning how to buy a home.

How to buy a home with bad credit?

So this is a problem that a lot of people face when they're looking to get a mortgage and there are actually a lot of different loan programs that you can use for bad credit.

Main loan programs and their credit score minimum

So the main one is FHA, you can go all the way down to a 500 credit score. Same with USDA, you can do 0% down with a 500 credit score. VA, you can do 0% down with a 500 credit score. If you are a Veteran. So there are really good programs here.

What to do f we have bad credit?

If you do have bad credit now, something to keep in mind is that you might save a lot more money if you work on your credit first and then get a loan with higher credit. But it absolutely is a possibility you can go all the way down to a 500 credit score. It just might be worth doing a little bit more work so we can get a little bit more savings in the future.

Buying a home with no money down

So how to buy a home with no money down? So a lot of people think 20% is how much you have to put down on a home. That's really not the case, right? If you do a conventional loan, it's 3% down. If you do an FHA loan is 3.5% down. Now both of those programs, you can actually use down payment assistance. Then often a lot of people can get down payment assistance, where they don't have to pay any down payment.

What we need to consider

There are costs of some drawbacks you have to consider with those programs. Now through 0% down, you could do a USDA for a rural area. Outside of a city, you can go USDA and do 0% down. Or if you're a veteran, you can get 0% down on a loan as well.

How to buy a home without a realtor

So if you don't want to use a realtor, maybe you want to drop the purchase price by the realtor's commission, or for some reason you don't want to work with a realtor.

Understand what you are getting into

The first thing you need to keep in mind is that you understand the contract that you are going to be involved in when you're looking to buy someone else's home. You have to be careful about understanding what you're signing up for when you're signing this contract.

Same loan process

The process is going to be very similar. Whether it's with a realtor or without. You're going through the same process of you need to get approved for a loan. You need to go find some homes. Maybe you need to call the listing agents to take a tour or the seller to take a tour. And then you're going to write an offer and then closing the home process is going to be very similar.

Learn to negotiate

If you do this option, see if you can negotiate to drop the purchase price by the amount that the buyer's realtor would have been paid.

Buying a home for the first time, things to consider

How it's my home for the first time. So in my mind, there are a couple of different steps of buying a home, whether your first-time buyer, or a second-time buyer really it's going to be pretty similar.

Money talks

The first thing that you need to do is make sure that you're very comfortable with your own finances. Do you have money in the bank? Do you have a budget? Because buying a home is not going to make your current money problems get any better. It's only going to make any bad problems become worse. It's going to amplify your situation. So make sure you're comfortable with your finances and your budget, how much money you have in the bank account.

Pre-approval process

Then what you need to do is you need to talk to a lender and get pre-approved for a loan. They'll tell you what type of loan you can get approved for how much it's going to cost, and what your monthly payment will be. All of that kind of stuff.

Hire a realtor and writing an offer

So you're going to call up a couple of different realtors, find one that you like to go shop for some homes. Then you'll write an offer on a home. After that, it's going to be pretty smooth going through the process because you have your lender and your realtor helping you navigate those two.

But getting those beginning pieces, understanding your finances getting pre-approved, and then talking with a realtor are the main components for first-time buyers to get started through the process.

How to buy a home in foreclosure

So if a home has already been foreclosed on it's most likely going to say this when you look at it as an online listing, maybe on Zillow or or whatever home search site that you're on. And it's going to be a very similar process to just any other home.

Conventional loan for foreclosures

With foreclosures though, you might need to purchase it with a conventional loan, because those are going to be more lenient on the appraisal standards of the property. Whereas some other loans like FHA, USDA, and VA can be more strict when it comes to foreclosures and the condition that they're in.

Buying with low income

How to buy a home with low income. This can be a bit of a misconception because lenders don't have a minimum income for you to qualify for a mortgage. What they're mainly concerned about is how much debt do you have compared to your income.

So there are certain loans that allow you to have a lot more debt compared to how much income you have. So a really good loan for this is something like an FHA loan. Now, if you have a low income, you might be having difficulty saving for a down payment. And so we can circle back to no money down, right? Down payment assistance or some of those zero down programs.

How it's about home in another state?

So this can be really tricky because it's going to depend on how far away is the state? Are you willing to travel to go find homes as far as qualifying right now, what you have to do in this kind of COVID world is either show that you can work remotely or you need to start working in the new state before you can actually qualify for a loan there.

Virtual tour is now a thing!

As far as actually viewing the property, you might be able to get a realtor to do a virtual tour for you. Maybe they can FaceTime you or they can prerecord a video for you to walk through a home. So you can be able to write an offer without actually having to go there.

Now, at some point, you're probably going to want to see the home in person, but with how competitive the market is right now, you might not have the luxury to be able to go travel to the new state and then be able to look at the home and then write an offer without getting beat out by somebody else who's a little bit quicker on the draw of the offer.

No credit, no problem

How to buy a home with no credit? So this is actually not too difficult to do. It's going to be what's called Manual Underwriting. You can do this on any loan type without any credit. You can do conventional, you can do FHA with no credit at all.

No credit vs. bad credit

Now, no credit is not the same thing as bad credit. No credit means no credit whatsoever. So lenders normally is going to request alternative trade lines.

Alternative trade lines

This is something like they're going to want to see, maybe you have a utility bill or insurance payments. They want to see these on-time payments, this history of on-time payments to almost establishing a pseudo credit score for you. They're going to be seeing, do you make payments on time? Like you're supposed to, and if so, they'll give you a mortgage.

How do you buy a home in pre-foreclosure?

So a home in pre-foreclosure is not technically on the market yet, and you're gonna have to be doing your own research to be able to first figure out what homes are in pre-foreclosure just have a lot of tax. So when you're going through this conversation, because you're talking to homeowners who have the potential of about to lose their home.

You need to negotiate

So you would have to negotiate with them by saying, Hey, I've an interest in buying your property. Is this something that you might be interested in selling to me? And that could prevent them from going through the entire foreclosure process and possibly help you get a home that has less competition because it's not on the market yet. So hope this helps answer your home buying questions.

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Only for educational usage. All calculations should be verified independently. Win The House You Love LLC is not a lender, does not issue loan qualifications, and does not extend credit of any kind. This is not an offer to lend and should not be used to make decisions on home offers, purchasing decisions, nor loan selections. Not guaranteed to provide accurate results, imply lending terms, qualification amounts, nor real estate advice. Seek counsel from a licensed real estate agent, loan originator, financial planner, accountant, and/or attorney for real estate and/or financial advice. Read the full disclaimer here.