Advice needed for Mortgage Loan by August 2015

[joshall]

Hi all,

This is my first post here, and I am hoping that I can get some advice from my fellow bloggers.

I am hoping to be qualified for a home mortgage by  August 2015.  My current FICO scores is 710 (I think it is mediocre due to the fact that I have only 8 years of credit history).

I have the following debt on these CC:

RH: $0/ $6,000; 25% APR

CapOne: $0/ $4,000; 22.9% APR

CapOne: $0/ $1,400; 19.24%

WE: $0/ $3,000; 22.88% APR

AE: $1,600/ $6,700; 15.24% (UTIL 24%)

Chase: $0/ $2,400; 19.24% APR (UTIL 0%)

Chase: $1,700/ $6,800; 16.99% APR (UTIL 25%)

Credit card history: 8 years

0 late payment

3 closed auto loans

I have $2,500 per month to pay off credit card debt, or I can save this amount towards my down payment ($2500/ month would have saved another $17,500 by August).

Should I be saving money for down payment? Or should I be paying these credit card debts first?

On a side note, what would be the best way to boost up the scores from 710 to 760?

Any comment is appreciated.

Thanks,

joshall

[newstart2010]

Paying your cards down will boost your credit a ton.  Do not open or close any.  If you have no derogatory trade lines or marks you are in good shape. Just pay them down as much as possible.  That willincrease your scores.  Your best bet is to get them all to zeroexcept for 1 and have that one at 5% or less.  Do not take it below 1%.

Then start saving for your downpayment.  Witha good enough score, no debt, and amazing historyyou have great chances at a 0% or 3.5% down loan.

[joshall]

Thanks for your advice!

wow- I have never heard of 0% down.  I am aiming to apply for a conventional loan, with 5% down.  First time home buyer here. What do you think my chances are for getting pre-qualified? I am located in Southern California.

Thanks!

[newstart2010]

I know we only needed 640 to get approved for our 5% down conventional loan.  But our intrest rate would have been super high.  Being at 700 made our intrest rate easier to swallow.

[frugalQ]

agree with Newstart,

the rate tiers (at least for conventional) are 660-679, 680-699, 700-720, 720+

[joshall]

I have always thought 720+ for auto loan but 760+ for mortgage?

[ShanetheMortgageMan]

It's 740+ for mortgage rates, it's 760+ for PMI rates.

Interest rate pricing adjustments based on FICO/LTV:

PMI rates based on FICO/LTV:

[joshall]

Thank YOU! That is a very informative chart.

One more question, we might be loaning $5000 from 401k. Will that be reported to Credit Reporting Bureau? What is the impact of a 401k loan on the mortgage pre-qualifying and application process?

[ShanetheMortgageMan]

It's fine to take a loan out against your 401k for down payment and/or closing costs.  It isn't reported on your credit report.  The $ for loan you will be taking from the 401k will be trasnferred to your checking account from the 401k.

So since you mentioned you had $42k in savings, and $21k in the 401k, then after the loan will be taken out it'll be $47k in savings and $16k in the 401k (then 60% of the vested balance is what qualifies as reserves).

[joshall]

That makes sense.

Is a 401(k) loan subjetced to 20% federal tax withholding and a 10% tax penalty?