No Credit Check Home Loan
I'm hoping some of may be able to share some of your knowledge and
experiences pertaining to bad credit and obtaining home loans. First, a bit
of background:
In 1995, before we were married, my wife enrolled in a debt management
program at Consumer Credit Counseling Services (CCCS) in San Francisco to
consolidate her overwhelming debt payments at the time (she was still in
college and had racked up $15k in plastic debt over the years). She was on
track to pay off all balances over a course of 5 years, but due to an
inheritance she was able to pay off the entire balance by the end of 1997.
As fortuitous as that was, CCCS was apparently remiss in making adequate
final payments to all her creditors, and as a result, even though all
balances are now zeroed out, there are several 30-day- and 60-day-late marks
on her credit report, the last one occuring November 1997.
I have recently written a letter to CCCS apprising them of the situation,
and am even considering legal action, but after some investigation into the
legalese of the debt management plan, I doubt they can be held responsible.
(And I even doubt if CCCS would be able to correct the blemishes even if
they wanted to.) So I am assuming the worst, that the blemishes will stay on
for the next several years.
We are (now) married, in our late 20s, my credit is fine, our income level
and savings base is quite comfortable, and we are both steadily employed
(teacher for 2 years, and software developer for 5 years). In short, if it
weren't for those blemishes, we'd be an ideal candidate for a lender to loan
money to.
So, my question is, will those marks significantly affect our chances of
obtaining a home loan in, say, 2 years? (Which would be 3 years after the
last blemish.
What may help (it certainly won't hurt) would be to ask CCCS to write a letter
explaining the "blemishes" and to put it in your credit report. Depending
on the lender, they may take that into account when processing your loan
application.
What will certainly help your chances the most would be if you could save
up enough money to be able to put 20% down on the house. It is often the
insurance underwriters who decide who gets loans and who doesn't, and
putting 20% down will knock off PMI (private mortgage insurance) and more
more obsticle to you getting a loan. My husband and I were in a similar
situation, although he managed to avoid the "blemishes"...he had racked
up a lot of credit card debt, due to being in school with inadequate
financial aid, and then a lot of doctor bills. While that has been paid off,
he hasn't been continuously employed for the last 2 years (due to the
illness that caused all the doctor bills). They were not going to give us
the loan, even with 15% down, but everything was fine with 20% down.
At worst, so long as you find a house that will put you within Freddie Mac
(I think that's the right one) guidelines for a loan (usually 28/33 debt
ratios, ie 28% of your income can be the house payment, including
insurance and property tax, 33% of your income can go to debt payments,
including home loan and credit card minimum payments, etc) you should
be able to find a bank that will give you the loan. You might have to
put down a little more, or you might have to pay a slightly higher interest
rate, but it shouldn't be a real problem. Right now, there are banks offering
1st mortgages with no credit check and no income verification! Interest
rates for these are a point or so higher, but even those rates are low
compared to what my parents paid when they bought their last house