Here’s my situation. I have poor credit, currently between 560 and 580, due to past debts. I’m a self-employed therapist and my client base has been minimal over the past five years, resulting in low earnings. However, for the last seven months, I’ve seen a significant increase in clients and income. I’m now ready to buy a home and I can put down 20% from my trust fund. The trust has restrictions so I can’t use it to pay off my debts. What mortgage options do I have considering my bad credit and recent improvement in income?
Keep building a steady income and reevaluate your options in 2027. By then, you’ll have a solid financial foundation to present to lenders.
Taj said:
Keep building a steady income and reevaluate your options in 2027. By then, you’ll have a solid financial foundation to present to lenders.
I agree. In 2027, you’ll have two full years of solid income and potentially a much improved credit score. It’ll be a stronger position to secure a good mortgage.
@Lane
Plus, interest rates might be more favorable by then. Two more years of renting could actually be financially beneficial in the long run.
Shai said:
@Lane
Plus, interest rates might be more favorable by then. Two more years of renting could actually be financially beneficial in the long run.
Absolutely. I just bought my first place and I’m hoping rates drop too. Here’s to better financial times ahead!
Taj said:
Keep building a steady income and reevaluate your options in 2027. By then, you’ll have a solid financial foundation to present to lenders.
That’s the best course of action.
Taj said:
Keep building a steady income and reevaluate your options in 2027. By then, you’ll have a solid financial foundation to present to lenders.
Maybe even by 2026, after you’ve filed your taxes for this period of increased income. That’ll also give you time to boost your credit score.
It’s crucial to rebuild your credit and stabilize your income before applying for a mortgage. Lenders need to see a consistent track record of income and debt repayment. Your down payment is helpful, but the lender is taking a bigger risk and needs assurance you can handle the loan.
I offer credit repair services and could help you strategize for better credit to qualify for a mortgage. Consider improving your credit score to at least 640 before applying. Where are you located?
Your income needs to be documented via tax returns to qualify for the mortgage payments. However, the trust fund might help by providing additional documented income. Also, focus on improving your credit by managing debts and disputing any inaccuracies.
Are you a doctorate-level therapist? Some lenders offer special loans for doctors which might be an option.
You might consider an FHA loan. They require a 10% down payment for credit scores under 580 and you’ll need proof of income from your trust.
Max said:
You might consider an FHA loan. They require a 10% down payment for credit scores under 580 and you’ll need proof of income from your trust.
It sounds like the trust funds can only be used for the down payment, not as proof of income, right?
With a credit score of 580, FHA loans are possible. Also, discuss with your tax preparer to ensure your income is well-documented for the past two years.
Consult a reputable lender to review your finances and set a clear path towards loan approval. They can guide you on the necessary steps to take.
Look into non-traditional lenders who might accept bank statements or profit and loss statements instead of traditional income verification, especially if you can improve your credit a bit more.
Lenders typically require two years of tax returns to calculate your average income. You might need to wait until you have two full years of higher income to qualify for a better mortgage rate.
Just checking, but are you a veteran? There are specific loan programs for veterans that might be beneficial.
Lyle said:
Just checking, but are you a veteran? There are specific loan programs for veterans that might be beneficial.
No, I’m not a veteran.
Look beyond traditional banks. Some private lenders offer flexible terms even if mainstream banks turn you down.