Is 600 a good credit score

From Thomas Jefferson to Donald Trump, White men have shown that owning real estate is the cornerstone of wealth building in this country. It's the single largest investment any of us is likely to make, and property usually constitutes a person's greatest financial asset. During the last ten years, real estate has also proven to be the best investment for earning huge returns. Yet African-Americans lag behind Whites in home ownership by 26.2 percent. This is largely because of our history: For more than 300 years we were slaves in America, which by definition excluded us from owning anything at all. And even when we were freed and told we might receive 40 acres and a mule following the Civil War, it was a proposal soon undermined. Indeed, much of our history with land and property ownership in America has revolved around our seeing it stolen, burned to the ground, redlined or denied through blockbusting.

In this guide to home buying, we will give you the tools necessary for successfully staking your claim to those 40 acres--a metaphor in today's market for African-Americans buying real estate, whether a house, condo or rental property. We also profile four home owners who have used real estate to begin building their own portfolios of wealth and power.

THE POWER OF OWNING

In capitalist America, those who own always get more economic breaks than those who rent. There's the tax break, for starters. When you buy a home, you typically take out a mortgage loan to finance the purchase. Most of your monthly payback installments will consist of interest on that loan, and those interest payments are deductible from your gross income, thus lowering the amount of income on which you will be taxed at the end of the year. And the property itself represents collateral, which can be used to borrow more money in the future for anything from making home improvements to buying more property. The best part, though, is that the rising real-estate values over the past ten years have outperformed the stock market as an investment, with homes in many parts of the country selling for two and three times their original cost. (See wealth builder Tara Roberts's profile on the next page.) Finally, ownership gives a sense of power and permanence; you are the ruler of your own castle and not the pawn of a landlord. Think of rent as the money you give landlords to pay their mortgage. Think of your own mortgage as the money that gives you a springboard to financial empowerment.

FINDING THAT DOWN PAYMENT

If the thought of coming up with thousands of dollars for a down payment has kept you on the renter's fence, try mining these sources:

* IRAs and 401(k)s One of the few times you can tap these accounts without penalty before age 59 1/2 is for the first-time purchase of a home that will be your primary residence. You may not be hit with an early-withdrawal penalty, but you'll be taxed on the amount. Restrictions apply and rules vary depending on whether you're taking a loan or withdrawal from your account.

* Company credit unions Many companies have credit unions that offer their employees discounts on everything from car loans to mortgages. If you belong to a credit union, check to see if it will lend you money for a down payment or closing costs.

* Seller financing Often the owner of a property will "hold paper"--that is, finance a portion of the purchase for the buyer by not taking all the proceeds when the sale closes. Instead the seller may forgo the down payment or the closing costs and "lend" the money to the buyer, who pays it back with agreed-upon terms.

* Bank programs These plans can help with down payments. Wells Fargo, for example, features the National Homeownership Mortgage, which lets buyers obtain 100-percent financing if their FICO credit score is 620 or better. For details, see wellsfargo.com.

SAM'S HELPING HAND

We may not have received our 40 acres and a mule, but the government is apparently trying to make up with various initiatives:

* State Farm Insurance, Fannie Mae and Citigroup started the Student Homeownership Opportunity Program (SHOP), a workshop for students at Historically Black Colleges and Universities and community colleges. For more information, call (202) 263-2800 or visit cbcfinc.org.

* The Department of Housing and Urban Development (HUD) is proposing a "zero down payment mortgage" next year for Federal Housing Administration (FHA)-backed mortgages.

* HUD also sponsors The Teacher Next Door and The Officer Next Door programs. Call (800) 569-4287 or visit hud.gov/teacher.

GETTING THE LOAN

You've found the house you want at a price you can afford. Now you just have to be approved for a mortgage. According to Tonya Martin of First Merchants mortgage brokers in Brooklyn, banks or mortgage companies will consider these three areas when reviewing your application for a loan.

* Your income "Typically banks want no more than 34 percent of your gross monthly income going for debt servicing," says Martin. This means that the amount of your monthly mortgage, plus the taxes and insurance on the house (usually included in the monthly mortgage payment), should not be more than 34 percent of your gross monthly paycheck. If you make $50,000 annually, for example, the gross comes to $4,166.67 per month, and 34 percent of $4,166.67 is $1,416.67, so you may be able to carry a house that runs about $1,400 a month. This, however, ultimately depends on:

* Your other debts Banks will also look at other installment bills you pay monthly, such as credit cards, school loans and a car note, when evaluating you for a loan. In this instance they don't want your mortgage debt and other installment debt to be more than 40 percent of your gross monthly income. On a $4,166.67 gross monthly income, for example, total installment debt should not exceed $1,667 a month. So you may qualify for a house running $1,400 a month if your other debt doesn't exceed $267 a month. If it does, this will affect how much of a house loan you actually qualify for.

* Your credit rating This is just as critical as income in qualifying for a home loan, because your credit rating tells banks how good your record has been in making timely payments on other debts. "Credit-reporting agencies now attach a score to your credit rating," says Martin. "A score of 680 or above is considered good, and getting a loan should not be a problem if your credit rates this high. A score that's between 600 and 680 is considered fair, and may mean you will have to show other assets or put down more money to get financing. Any credit score under 600 is seen as poor. Financing isn't impossible, but you'll probably have to pay a higher interest rate or other fees to obtain the loan."

WHERE TO FIND DEALS

Even in today's red-hot real-estate market, there are house deals to be found. Here are some places to start looking:

* Foreclosures When banks or other financing sources take back a property, they usually want to sell it again as quickly as possible, often for a fraction of its real worth. Go to foreclosure.com to register for a list of foreclosed properties in your area.

* Public auctions If foreclosed properties aren't bought privately, they're put up for auction to the public. Your local newspaper will advertise available properties and auction dates and times. Keep in mind that if you win the bid on a property at an auction, you'll need at least 10 percent of the purchase price in a certified check at the time of the bid to secure it.

* Community programs Increasingly, African-American organizations in predominantly Black neighborhoods are developing real estate or renovating housing and selling it on favorable terms to area residents. The nonprofit status of such groups makes them eligible for grants and subsidies that can drastically reduce the cost of purchasing for first-time home buyers, though the red tape involved can make the process time-consuming. (See Darryl Benson's profile next page.) Find out which organizations in your neighborhood are financing housing ventures by calling churches, community-development corporations and civil-rights agencies.

BUYER BEWARE!

Real estate usually involves big money, which makes it ripe for scams. Watch out for these shady moves:

* Developer's glad-handing Many housing developers will offer to do everything for you from inspecting the property you're buying from them to financing the mortgage. But there's often a conflict of interest. Any inspection of the property should be done by a professional you've hired, independent of the developer. Compare rates and your eligibility with banks or mortgage companies before jumping at developer financing.