Mortgages for people with perfect rental history/damaged credit?

Question

Are there any mortgage programs out there that would help a family with a long,excellent rental history,but w/bad credit?My friend got a 1st time home-buyer loan & the loan company pd. off her debt(less than $10,000)which enabled her to qualify.It's just so unfair.We're a family,married 18 years,same line of work for 20 years,excellent rental history & references yet because of bad credit wecan't buy a home.It started 6 years ago when my husband's company closed & he lost his job. He got another job within a few weeks but because of unpredictable circumstances (he's a civil construction sptd. &works outside...the day he was hired at the new job it snowed 3 ft. & the company was unable to work for wks).Our top priority has always been home1st no matter what it takes(that's why the credit went bad because we had to choose betwn our home and credit cards & we chose our lease. Why don't lenders look at this.It seems it should count for something.Anyone know of any mtgs for this situation?

Answer 1

In the past, lenders would look at this because they did manual underwriting.  They would look at utility payments, rental payments, etc. to determine if you were a good risk.  Most underwriting today is automated, meaning you plug information into a computer, press a couple buttons and you get an underwriting decision.  (I've oversimplified it a bit, but you get the idea.)  

Some lenders will still do manual underwrites for specific situations.  When I was an underwriter, I did some.  Maybe you can find a lender in your area who still does this type of underwriting.  Unfortunately, with computer automation, it is a dying type.  So much emphasis is on credit scores that lenders really can't do this much anymore.

Do you belong to a local credit union or is there a small local bank in your area?  Sometimes credit unions/small local banks have their own little quirky programs that they keep "in house" meaning they do not sell the loan to someone else.  When you sell a loan to someone else, a lender has to follow that groups guidelines and their hands are tied in unique situations.  However, for in house products, the lender sets its own rules and can be MUCH more flexible.

Answer 2

The deal your friend got sounds sorta flaky to me.  The loan company undoubtedly burried that $10K in the loan somewhere.  And I bet that mortgage ain't a 30 year fixed rate or even a decent interest rate.

If you really want a house, you need to clean up your credit and put money aside for a downpayment.  You are not going to find any more of those "creative financing" deals that were so prevalent -- by the way, those are the ones that are or soon will be foreclosed.

Start with paying off the credit cards.  Take every penny you can squeeze out of your budget and throw it at the highest interest rate credit card, while paying minimums on the rest. When the highest rate card is paid off, move to the next till they are all paid off.

Next work on settling the derogatory items.  Start with the newest and work back to the oldest.  If you have single entry items like medical, utility, or cell phone bills, ask for a pay for delete.  This doesn't work as well for regularly reported items, like credit cards.  Collection agencies can only remove what they report.  The original creditor's charge off would remain.

Get written settlement agreements before you pay anything and keep it, along with your payment proof, forever.  Do not give collectors direct access to your bank account.