Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

02/11/2008
Single parent with goal to become a homeowner
Well I am a single Parent of two kids. My question is geared toward home ownership. I have a low credit score and I know nothing is free. My goal is not to rent. Right now I am living back with my parents. I've researched HUD Homes, but I do not know where to begin to start on my journey to becoming a home owner. Are there programs out there to gear me towards the right direction, my income is not that much. When I have enough money, I will work on my credit (which consists of charged off credit from years ago). HELP! Lead me in the right direction.
Jane Callahan:
expert info »
With the credit crunch in the financial industry, a low credit score combined with income that is "not that much" will make it difficult to get lending. While it is a buyer's real estate market and interest rates are
low, you may still have to be pre-qualified for a loan to make an offer. I would suggest that you visit your local bank, credit union or mortgage company just for an exploratory interview to find out if you would qualify for a loan; if so, for how much, and with what terms.

You are on the right track when you say you want to work on your credit. While you've got the support of your parents; living arrangements, you should focus on doing that by paying off credit card and debt consistently. A year or so of on time payments, regular income and reducing debt may improve your credit score and deem you more credit worthy. You should also obtain a free copy of your credit report, if you haven't done so to see what's on it and be sure that the information is accurate.
Jody Rorick, CPA:
expert info »
Your credit score is first. You can't do anything towards home ownership if you don't have good credit. After that and [after] you've accumulated a down payment (try for at least [a]10% [down payment]), then look for an FHA loan. They're government insured, with a small down payment, geared to low income and first time buyers.
Delores Lenzy - Jones, CPA, CIA:
expert info »
The Internet is your friend. I would "Google" first time home buyer and you should get many suggestions on different first time home buyer programs. I would suggest saving while living with your parents to put a nice down payment on a home when you can afford one. Also, consider foreclosures as an option. They are usually cheaper than market prices. Also, try to improve your credit score by paying your existing bills on time. Good luck!
Bettye J. Banks:
expert info »
(1) Find a HUD-approved housing counseling agency to help you. Sign up for a homebuyer education workshop. This could cost you a Saturday because the classes usually take at least 6 hours and can take up to 12 hours over a period of weeks. HUD-approved agencies can help walk you through the process and provide you with a homebuyer’s roadmap. Most areas have programs designed to assist prospective home buyers (especially first-time home buyers and single parents) with down payments, closing costs or other assistance. Start with those who know the process without have a personal benefit to them. HUD- approved agencies meet this criterion.
(2) Your local, accredited, credit counseling agency can help you with the credit problems. It's not just paying old accounts off. If you don't know the process, you could cause a bigger problem. The timelines of charged off accounts is important. Be careful not to restart the clock on old accounts. There is a way to honor your obligations without doing that.
Susan Saleem:
expert info »
Your primary focus needs to be your credit score. Until you improve that, everything will cost more, including a house, a car and any other credit you may be paying on. I think you need to be focused on what you can do TODAY, whether that means saving from each paycheck or reducing your current debt. Start to move forward even if it is in small steps. A long-term plan will be very rewarding.
Rebecca Schreiber CFP®:
expert info »
The most valuable piece of information I can offer is to start with a budget. Look at your expenses and figure out how much you can really afford to spend on a home. Then call a lender, HUD [the U.S. Department of Housing and Urban Development] or a mortgage broker and find out what your monthly payment would be, given your credit score. You may find that improving your credit score will save you hundreds of dollars a month in interest [and] that it is worth the wait to get your credit score back up. So to move forward:

1. Call HUD and some local lenders to find out more about their programs and how much home you can afford.
2. Create a budget to track what you spend now and compare that to how a
mortgage payment would affect your lifestyle. Would it eat up most of
your income?
3. Start talking to friends, relatives and people in your community to learn from their experience. The exact information you are looking for might already be in your circle of friends. Believe it or not, making smart financial decisions starts with talking to people. We learn best from each other, and once you learn what works for the people in your community, talk to a professional to find out what options are right for you. Best wishes.
Jeff Kyle:
expert info »
You are already on track! Two main things need to happen. You need to get your credit score (no more sub-prime lending) up high enough to qualify for a loan & be able to afford the payments. If you have not done so already, find a trustworthy mortgage lender who will work with you in the building of your credit score! Do exactly as they say. This may take some time (up to a
year or two). Also, work on creating a budget so you'll know what your fixed monthly expenses are and be able to track all of your in & out flow of your monies. Developing this discipline is crucial in sound financial planning & personal money management. You might need to work on earning more and spending less in order to put yourself in the best position to afford the
mortgage. I teach my clients to live by the 80-10-10 rule. Give away 10% to charity (church, synagogue, children's hospital...whatever), put 10% into an interest-bearing savings account (money market savings account is best /learn to pay yourself first), and then learn to live within the 80%. The mortgage professional you work with will advise you as to how much you will
have to set aside for a down payment for the home purchase. This will largely be determined by the loan type & your credit score. Hope this helps & best of success to you!
 

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