Get in now or wait for better credit

[Dillon Penner]

I am committed to buying my first property in 2023, but I am torn on jumping in with 2 feet right now. I am currently around 650 670 credit score and I plan on house hacking with a FHA loan. With current interest rates I am wondering is it better to wait until I am at least a 700 score or better? Or should I not worry too much and just get started on getting pre approved with my credit now? Any pros & cons and help with this scenario is greatly appreciated!

[Bruce Woodruff]

Just get started. ASAP. A few dollars more or less in monthly payments due to the interest rate will not matter compared to you r possible appreciation and just getting some skin in the game and gaining some knowledge...

[Crystal Smith]

Quote from @Dillon Penner:

I am committed to buying my first property in 2023, but I am torn on jumping in with 2 feet right now. I am currently around 650 670 credit score and I plan on house hacking with a FHA loan. With current interest rates I am wondering is it better to wait until I am at least a 700 score or better? Or should I not worry too much and just get started on getting pre approved with my credit now? Any pros & cons and help with this scenario is greatly appreciated!

 Get pre-approved now and start looking for a property. While you're looking keep working on improving your credit score.  The perfect scenario is you get a property under contract and share it with your lender, who will then rerun what programs you're eligible for with your new 700 credit score. 

[Dillon Penner]

Quote from @Bruce Woodruff:

Just get started. ASAP. A few dollars more or less in monthly payments due to the interest rate will not matter compared to you r possible appreciation and just getting some skin in the game and gaining some knowledge...

[Dillon Penner]

Okay definitely makes sense to get some experience while it’s better not to wait and miss out on appreciation, thanks!

[Dillon Penner]

Quote from @Crystal Smith:

Quote from @Dillon Penner:

I am committed to buying my first property in 2023, but I am torn on jumping in with 2 feet right now. I am currently around 650 670 credit score and I plan on house hacking with a FHA loan. With current interest rates I am wondering is it better to wait until I am at least a 700 score or better? Or should I not worry too much and just get started on getting pre approved with my credit now? Any pros & cons and help with this scenario is greatly appreciated!

 Get pre-approved now and start looking for a property. While you're looking keep working on improving your credit score.  The perfect scenario is you get a property under contract and share it with your lender, who will then rerun what programs you're eligible for with your new 700 credit score. 

Awesome, makes sense thanks for the input!

[Matthew Vance]

Hi Dillon,

From my experience, in the last year or so, if you weren't bringing all cash to the table for an investment property your offer wasn't looking attractive. That's not to say you couldn't win with a conventional loan. But making offers with an FHA loan was a big no no! Reason being is that when going the FHA route the bank will have higher standards on the property. For example, our first home we used an FHA and they made the seller replace a window, completely remove a shed in the backyard that was sagging a little because it could be a hazard, and a bunch of other things.

Sellers know that if a buyer is using an FHA loan the bank may require more repairs compared to other loans. This means inspection objections, seller concessions, seller repairs, etc.

Now that the market has softened sellers are more willing to consider FHA, so you should take advantage of this opportunity. Although FHA may have slightly higher interest rates compared to a conventional loan there are some nice first time home buyer down payment assistance programs you can tap into, CHFA being one of them. I believe you need to go FHA in order to qualify for CHFA down payment. I believe CHFA covers 3% of the downpayment and it acts as a secondary lien on your house. The downpayment assistance is 0% interest, no payments, and is due in 30 years or when you refi/sell the property. Really great way for beginner investors to keep their cash reserves for the rehab.

You're credit score looks great, get pre-approved so you know what you're working with, and understand that when making offers you can ask for seller concessions. Seller concessions can be used to buy down points on your loan permanently or you can look into a 2-1 buy down.

[Andrew Syrios]

Who knows where rates could go. It's highly likely they'll stay high throughout all of 2023 and 670 is plenty for FHA. I would start looking and see if you can find a good deal. Just don't push it in a market like this. But the type that waits for a better market typically just keeps waiting and waiting and waiting...

[Dillon Penner]

Thanks everyone for the replies definitively gave me great insight!

[Conner Olsen]

Quote from @Dillon Penner:

I am committed to buying my first property in 2023, but I am torn on jumping in with 2 feet right now. I am currently around 650 670 credit score and I plan on house hacking with a FHA loan. With current interest rates I am wondering is it better to wait until I am at least a 700 score or better? Or should I not worry too much and just get started on getting pre approved with my credit now? Any pros & cons and help with this scenario is greatly appreciated!

Ask your lender the easiest way to bump up your credit. A lot of times they have a couple tips that can increase it 30-40 points.