Q: My credit score is 639 and I am a government retiree who met retirement qualifications at 55. My income is $40,000 annually and I would like to purchase a condominium because I don’t want to worry about yard upkeep and I live alone. Should I contact a developer or FHA to inquire about purchasing a property?
A: Neither. You need to figure out what neighborhood you want to live in and then find a great real estate agent who understands what is happening with home values there.
The agent you choose to work with should be a great listener, and work with people who are around your age and earn what you do. Your agent should be your eyes and ears in the neighborhood, so look for someone who has been working in your neighborhood of choice for some time, who is well-positioned to help you find a great deal.
Once you find a great agent, you’ll want to put together other parts of your home-buying team, including a good mortgage lender. Talk to a loan officer at a credit union (if you belong to one or can join one) because credit unions typically offer great deals on mortgages and car loans. You should also talk to a national lender and a local mortgage broker. By shopping around, you should get the best deal available.
Before you go out looking for a condominium to buy, you should understand that your credit score is relatively low. While in past years, having a low credit score may not have been an obstacle to purchasing a home, your score may cause you to pay more to close the loan when you purchase the condominium and it might mean that you will also pay a higher interest rate on any loan you obtain.
You might want to try to figure out why your credit score is so low and work to improve that score. Once the score is higher, you might find that the costs of owning the condominium – should you decide to finance your purchase – will be lower.
Start by checking your credit report at www.annualcreditreport.com and trying to figure out why your credit score is low. If you have too much debt, too many outstanding bills, missed payments, collection issues or bills that you are paying over time, you might need to clean some of these items up to improve your score and have a better time of obtaining a loan.
You can also sit down with a good mortgage lender and work through some of your credit issues. If you know what your issues are, you might find that over six to nine months, you might be able to improve your score by paying off debts or paying down credit card balances.
Once you know how much you can spend, and what it will cost you to finance the property, figure out what neighborhood you want to live in and find the right agent, you’ll be ready to start looking for a home to buy.
March 13, 2009