mortgage

Buying a house? Not with your credit score

Don TaylorQuestionDear Dr. Don,
I have a credit score of 494 and work two jobs, but I still don't make more than $2,200 per month, including my child support. Would I be able to buy a house with my income?
-- Christina Credit

AnswerDear Christina,
I think it's best for you to postpone your dream of buying a house and concentrate first on improving your credit score. No mortgage lender is going to want to lend to you with a credit score less than 500. Your score is roughly equivalent to one of a person who has recently filed for bankruptcy protection.

The good news is you can turn your credit score around. All you have to do is get current and stay current on your bills. Negative information, other than a Chapter 7 bankruptcy filing, stays on your credit report for seven years. A Chapter 7 bankruptcy filing stays on your credit report for 10 years. Once you get your credit score back up into the upper 600s or low 700s, you can consider applying for a mortgage.

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Your income will limit how much house you can afford. In general, mortgage lenders don't want their customers spending more than 28 percent of their monthly income on principal, interest, taxes and insurance. The lender will have underwriting standards concerning how they count child support payments. In general, you have to have been receiving payments for the past year and expect to continue receiving payments for the next three years for the child support payments to figure into how much house you can afford.

Aside from income, you must also consider how you will come up with a down payment. When you have your credit in shape, approach your local housing authority about grants and down payment assistance programs to see if you qualify.

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