- The Washington Times - Friday, April 2, 2010

My assistant has nicknamed me “Filterless” because of the direct speaking method I use when talking to some folks. Admittedly, my straight talk sometimes casts me in the role of the messenger - who often gets shot for his pains.

Last week, a young woman called to inquire about obtaining a loan to purchase a property for $98,000 in South Carolina. She immediately proffered the information that she and her husband are renting the house they want to buy and that her husband would be applying for the loan in his name only.

She told me her husband’s credit score is 575 and they have saved $3,000 for a down payment. A credit score of 575, incidentally, is considered quite poor.

I immediately told her I don’t have any investors willing to take a borrower with a score that low, but it’s conceivable some lenders might offer loans insured by the Federal Housing Administration (FHA) that would accept her husband’s credit rating. She became a bit indignant and reminded me that they had $3,000 available for a down payment.

I had to bring this woman down to earth. I told her that FHA loans require a 3 1/2 percent down payment, regardless of the applicant’s credit score. In her case, that would amount to $3,430.

It was becoming pretty clear to me that this young couple probably was not ready for the responsibility of homeownership. I asked her some more questions. The husband’s low credit score is a result of late credit-card payments and vehicle repossession. Laughingly, she told me her credit score is far worse than his.

I decided to take off my filter and tell her that even if she could find a loan and purchase the home, she should question whether she and her husband are financially ready and responsible enough for homeownership. I explained to her that the easy-credit policies of the past were largely responsible for the mortgage meltdown and current economic mess the meltdown created.

I told her she and her husband should take a close look at their finances, develop a plan to ensure that all their obligations are met in a timely matter and create a disciplined savings plan that would increase their savings balance. In a few months, their credit scores likely would improve, and they possibly could have enough money saved for an FHA loan. Until she and her husband did this, I told her, I didn’t think they were financially responsible enough to purchase a home.

That did it. She said I offended her and I had just lost her business. She hung up.

It’s funny how some people get upset when you tell them something they don’t want to hear. My guess is that instead of listening to my advice, she will keep calling mortgage companies until she finds a loan officer who tells her what she wants to hear.

Henry Savage is president of PMC Mortgage in Alexandria, Va. Reach him at [email protected]

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