A Home Deferred and the Myth of Bad Credit

There's a couple, and you might know them, who spend their evenings sad-scrolling listings they’re sure they'll never own. They save the ones they love, the kitchen, the yard, the pool - the dream home they're sure will stay a dream. Their credit isn't where they'd like it to be. There's a card balance that got away from them, maybe an old collection still on the report, a score neither of them has the stomach to look at too closely. 

I hear some version of this more often than you'd think. Someone saves a listing on my site or on Zillow, and their name lands on my desktop. So I call them, and more often than not, the story is they're just browsing. They say they're probably years out from home ownership. “Can you check back somewhere down the road?” 

A low score is a symptom, not the diagnosis. Erin Handerhan is a loan officer at Responsive Mortgage, and in her experience "everyone puts all the emphasis on credit score, when in reality it's what's on the report." What actually matters is not that it’s low, but why it's low, whether that's a collection, a past bankruptcy, a repossession, or an item that simply carries a waiting period. Two people can share the same score and be in completely different situations, and only one of them might be a quick fix.

The misread is more common than most people would guess. Of buyers convinced their credit is too bad to qualify, "probably 75% of the time they’re incorrect," says Monique Keith, a loan officer at Zillow Home Loans.

"A lot of times people just need a plan," says Handerhan. "Maybe at that moment it is not good enough to buy, but there can be a plan put in place for them to be able to buy that doesn't take very long sometimes." That last part is where people are most often wrong. When they imagine repairing their credit, they picture years of work. What both loan officers described was often far shorter, depending entirely on what's actually sitting on the report.

Older buyers often assume they've aged out, convinced no lender will write a thirty-year loan for someone past sixty. Age, it turns out, is one more wrong assumption that doesn't survive a lender conversation. There are no age-specific programs, according to Keith, and a buyer in their sixties qualifies for the same loan products as a buyer in their thirties. She’s put people in their eighties into thirty-year loans, and notes that steering someone toward a shorter term because of their age would be discrimination.  A house is the same collateral at sixty as it is at thirty.

The hardest part is usually the conversation itself. Keith says what stops most would-be buyers isn't a program or a number. It's fear.  "There's just a fear around having that financial conversation," she says, the kind that keeps people from ever finding out what they'd actually qualify for. She casts her own role in blunt terms. "We're on your side," she says. "We're fighting for you, and we want the best for you." She's candid about her own first run at buying, years back, when she'd opened fourteen store credit cards chasing checkout discounts and had no idea it was working against her. She laughs about it with clients now, and tells them their situation usually isn't as tangled as hers was.

One practical note worth passing along, because it trips people up constantly. The number you see on a free credit site is usually not the score a mortgage lender pulls. Keith's advice is to watch your credit through your bank's own monitoring, and to deal with collection items rather than letting them sit and grow roots.

None of this means everyone qualifies today. Some people do need the plan, and some of those plans take real work. But despair is the wrong response to a number you might be misreading. The couple who never make the call lose the one thing that would have actually told them where they stand, which is a straight conversation with someone whose job is to find the path.

You don't have to have it figured out first. You just have to ask. Contact me and I'll connect you with a lender who'll tell you where you really stand.

Disclaimer: The mortgage information above is provided for educational and informational purposes only. Responses and opinions provided by Erin Handerhan (Responsive Mortgage) and Monique Keith (Zillow Home Loans) do not constitute financial or lending advice from eXp Realty. All loan products and qualifications are subject to lender terms and approval