Buying a house for the first time or upgrading from an existing house is a big decision. It is important that you have a good understanding of what you can and cannot afford to buy. If you already own a house but want to move and do not yet have your first house sold, there is the option of putting a contingency offer on the second house. This means that the second house is being held while you get your first house sold but in many cases, another buyer could bump the contingency offer.
In other words, contingency contracts usually only hold the house for a limited amount of time so if another buyer shows up without a contingency, more cash, or better credit, the seller may bypass you. Although this is an option, it should be carefully considered. If you have great credit or have cash to put down, you can usually make an offer without a contingency. However, if you need to sell your first house before you have the money to close a deal on a second house, then you have a real dilemma.
Often sellers are uncomfortable working with contingencies in that they want more certainty. To come to a compromise, sellers might accept the contingency contract as long as it has a “kick-out” clause. This clause states that if a better offer comes through, the seller has the right to accept the new offer, thus canceling your offer or give you a chance to close the deal before moving to another buyer. It is a far better solution to sell your first house before you put a contract on a second house. Going this route will end up saving you effort, disappointment, and money. If you are uncertain about your financial situation, meet with a financial advisor or mortgage lender before signing a contract.
Unfortunately, this is the situation of many people. Many divorced people end up filing for bankruptcy due to the financial issues involved. What are the options for someone in this situation where they have a good income, but need a loan for zero down loan because savings has been depleted? There are viable options allowing qualified borrowers to finance the entire purchase of a house, including closing costs. These options allow a buyer to purchase a house with no down payment.
The catch is that credit history needs to be spotless. If you have had a bankruptcy, there could be problems with qualifying. One thing to remember is that if you have filed bankruptcy, after two years have passed since its dismissal and you have maintained good credit since, you could qualify. For this, you should really look at your current situation and determine if this is the right time for you to buy. If you have just gone through a divorce, more than likely your bank account has been drained. Lenders prefer that you take time to rebuild your savings and get your feet back on the ground.
Obviously, from their viewpoint, they do not want to put you in a situation of defaulting on a loan because you were not ready. One of the factors taken into consideration for a mortgage loan is the credit score. If you are not sure what your credit score is, contact the three leading credit-reporting agencies, and request a copy of your report plus your score. Scores in excess of 700 are considered the best. Scores over 680 are also good but if you fall below 630, the lenders view it as you having potential trouble qualifying. If your credit score is not quite up to par, you should wait a little while before pursuing a house or you will end up paying outrageous interest rates.
Take the next year or two getting all your credit in order, bills paid off, and money socked away in the bank. Although it is tough waiting, it also provides you with a goal, which in the end will eliminate a ton of unnecessary stress and money. Once that has been accomplished, you should consider a Federal Housing Administration (FHA) loan, which requires only 3% down. In addition, their underwriting guidelines are less stringent than other types of loans.