- 26 Oct, 2023
Case Study: How I Bought a House with a 583 Credit Score?
How to deal with credit scores & mortgage fees?
As Calvin Coolidge (America’s 30th President) once said - “The ownership of a home, the feelings of independence that comes with the possession of a bit of the earth are among the most powerful incentives to high civic interest and usefulness.”
Becoming a homeowner is one of the most joyous moments any individual could get in their lifetime.
Here we have with us, two such happy homeowners who will be sharing their story on how they bought their house with a 583 Credit Score.
Toward the end of our blog post, we have some tips on building a strong mortgage application irrespective of the lowest credit score and higher mortgage fees. So, stick till the end and grab the tips.
Case Study 1 - Sam’s journey of turning financial struggles into homeownership
Sam is a 27-year-old strong-willed individual who has always wanted to own a house. However, just like you and me he faced a challenge and that is all about his credit score.
No matter how hard he worked to build his credit profile, he still couldn’t take it up to 620 which is the minimum credit score required by his target lenders. But, highly determined Sam didn’t give up!
Let’s understand his story in parts by addressing the struggle, assessing his situation, looking for mortgage options, working with a supportive lender, and finally achieving homeownership.
Sam’s initial struggle and efforts
His credit score was lower than he had hoped, mainly because of his past financial history. He had missed certain important credit payments and had a higher credit card balance.
On a fine Saturday morning, he decided to take his first step toward improving his credit score and increasing his chances of securing a mortgage. Here’s what he did:
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He wanted to utilize his weekend to the fullest and correct his credit score. His first step was to get his credit report and examine it closely. This time, he found certain errors and inaccuracies.
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It consisted of incorrect account information, disputed accounts not properly labeled, and outdated negative marks that had a drastic impact on his scores.
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With patience, he disputed these errors by contacting his bank’s support executive. This resulted in an improvement in his credit score.
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But he didn’t stop there, we know our Sam is determined. He developed a strategic plan and started paying off his higher credit card balances. He also made sure to make timely payments.
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After all these efforts he took his credit score from 576 to 583. This is a great improvement and Sam continued to maintain his responsible financial habits to help his credit score go up.
Research mortgage options
Now that Sam’s credit score has seen an improvement, he started looking for mortgage options and got to know about FHA loans that are backed by the government.
He started to go ahead with the FHA loans as it offered more lenient credit scores with minimum downpayment and competitive interest rates.
Sam works with a supportive lender
After a detailed review and thoughtful process of decision-making, Sam found a lender who was supportive and provided them with valuable guidance throughout the application process.
The good news is that Sam also managed to get a co-signer for his FHA application. With continuous guidance and support from his sibling (the co-signer) who had a strong credit history, Sam was able to successfully secure a mortgage.
He can now finally step into the home of his own. His visualizations came true because of his continuous efforts to improve his credit score.
Right from correcting his past credit score until adapting to responsible financial habits, he made sure to keep his report perfect without any errors or flaws.
Sam’s case is one that demonstrates a strategic credit improvement plan. His efforts prove that with the right plan in hand and personalized guidance from lenders, homeownership is attainable even with a credit score of 583.
Case Study 2: Lily’s resilient efforts in transforming from a renter to a homeowner
Meet Lily who just recovered from knee surgery. She works as a realtor and finally decides to move into a beautiful cottage in the countryside that she has been showing to her clients.
Along with Lily’s knee, her monthly income also took a downfall as she was completely bedridden for two months and couldn’t appear for home showings.
Now that she’s completely recovered from her illness, she wants to move to a new neighborhood and start her consulting business. However, due to unexpected circumstances, she had to spend higher medical expenses with limited income.
This took a toll on her credit payments ultimately affecting her credit score. But, Lily is tough and strong. She still decides to become a homeowner overcoming all the challenges.
Let’s see how Lily tackles her challenges by highlighting her story in parts like we did for Sam. Grab your favorite drink as we get started!
Lily’s initial struggle and efforts
Her credit score was exactly 583 not up to the mark and as a realtor, she knew that a 583 credit score is not too bad and she was aware of the ways to increase it.
Despite her financial struggle, the effort taken by Lily to provide a beautiful home for her family is an inspiration.
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As an expert in the housing market, Lily knew that improving her credit score would be the first step.
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Before taking out a credit report, Lily started to understand her credit score by collecting all her credit bills and invoices. She then moved the credit data and organized it on a spreadsheet.
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As a next step, she worked on obtaining her credit report. She compared her spreadsheet data with that of her credit report to identify if there were any negative implications.
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Upon further inspection, she found certain errors in her credit report and consulted with her colleague working in the mortgage industry.
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After getting guidance from her mortgage colleague, she negotiated with creditors to establish payment plans for all her outstanding medical bills and focused on paying off high-interest credit card debt.
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With disciplined financial management, Lily was able to see a steady increase in her score from 583 to 620.
Research government assistance programs
In spite of increasing her credit score, Lily still couldn’t afford higher down payments. So, she was on a hunt for government assistance programs.
As Lily is a first-time home buyer, she was able to reap benefits from government-backed home-buying assistance programs.
She explored the homeownership vouchers option for first-time home buyers that has the potential to help homeowners buy a home with a voucher received after admitting themselves into the “housing choice voucher program”.
One of the eligibility requirements is that home buyers need to show their low-income proof and Lily doesn’t fall under the low-income category. She went ahead with an FHA loan that offered her with minimum down payment.
Got her Home
Lily couldn’t resist her excitement in achieving her homeownership dreams. She went from the lowest credit score to a desirable credit score in just 6 months to secure a mortgage.
In addition to that, she was also able to get her friend to be a co-signer who had a solid credit history.
Lily’s continuous determination and persistence toward improving her lowest credit score helped her own home for herself and her family.
What do we need to learn?
Both stories taught us strategic methods to improve our lowest credit score. We came to know that, with continuous efforts and determination anyone can acquire a higher credit score and lower mortgage fees.
It is also important to observe the ways used to opt for the right mortgage program. Their stories inspire hope for anyone who is facing similar challenges on their path to becoming a homeowner.
How to build a strong mortgage application?
In order to eliminate hurdles while securing a mortgage, there are certain steps to follow in order to make your application strong and tough to reject.
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Credit score
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Every lender checks your credit score, and you can go through each step of the application only after showing a proof of desirable credit score.
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Review your report, fix any errors or discrepancies and take steps to improve your credit score.
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Determine your financial situation
Understand how much you can allocate towards monthly mortgage payments. This will help you choose the right term that fits your financial needs.
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Look for different lenders
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Research for different lenders in your region. Check if they are open to approving applications with desirable credit scores and mortgage fees.
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Compare mortgage rates, fees, and terms offered by different lenders to find the best deal to purchase your home.
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Steady income
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Show your lenders a steady and regular proof of income in order to speed up your approval process.
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Having strong income proof will act as a base to show the lenders your financial stability.
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Close pending debts
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Before taking out a mortgage, make sure you don’t have any higher pending debts stacked up in your account.
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Even if you do, make sure to clear it up before starting your mortgage application process.
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If you’re looking to avoid home loan hassles, make sure to check out our page to find pathways to a simpler home loan process.
Buying a house with a low credit score and competitive mortgage fees is a challenging task. Although it is possible to improve your scores, as an aspiring homeowner you need to have disciplined financial practices and make resilient efforts.
You need to be strong-willed like Sam and Lily to make your dreams come true. Good financial habits and patience is the key to your homeownership.
