Applying for Mortgage soon — questions about income/credit score

[Anonymous]

Hello everyone, new to the forum from Texas. 

       EQ: 663

       TU: 745

       EX: 652

Expecting small increases across all 3 bureaus soon, as Utilization should report 0% next month. Currently reading 5%.

       Income: 150k/yr (10+ years; same company)

       Credit lines: 3 cards, 7500 total credit line, 0 balance on all 3.

No car payment, own mine. No other credit-reporting bills. 

I have 4 collection accounts showing up on Experian and 1 on Equifax. All from the same company, same account. Not sure how they managed to get multiples on my credit. I am working with a lawfrim and expect them removed in the next 2 months as I have proof of payment to the original company that sold the false debt.

Anyway, my lease is up October 5th, 2017, and I would like to buy a house. My recent research tells me that you can now do 3% down on a conventional loan mortgage if the value is $424k or less. 

My questions are:

1. Is my research accurate with respect to the 3% down payment?
2. Based on my info provided above, how likely am I to be approved for a $400k home?
3. Do I have to have a physical address of a potential home to get a loan, or can I get approval and then shop (my preference)?

Thank you very much for any guidance and help. 

[Anonymous]

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@Anonymous wrote:

Hello everyone, new to the forum from Texas. 

       EQ: 663

       TU: 745

       EX: 652

Expecting small increases across all 3 bureaus soon, as Utilization should report 0% next month. Currently reading 5%.

       Income: 150k/yr (10+ years; same company)

       Credit lines: 3 cards, 7500 total credit line, 0 balance on all 3.

To maximize FICO scoring let one card report a small balance, like $10. Having zero balance across the board lowers your score.

No car payment, own mine. No other credit-reporting bills. 

I have 4 collection accounts showing up on Experian and 1 on Equifax. All from the same company, same account. Not sure how they managed to get multiples on my credit. I am working with a lawfrim and expect them removed in the next 2 months as I have proof of payment to the original company that sold the false debt.

I hate that you hired someone to do this. It's easy to do yourself. What's done is done, but this forum is a great resource for how to fix credit report problems yourself. 

Anyway, my lease is up October 5th, 2017, and I would like to buy a house. My recent research tells me that you can now do 3% down on a conventional loan mortgage if the value is $424k or less. 

My questions are:

1. Is my research accurate with respect to the 3% down payment? Yes.
2. Based on my info provided above, how likely am I to be approved for a $400k home? Your income and DTI say yes. I think you have a great shot at getting the loan but we need more info to give you a better opinion.
3. Do I have to have a physical address of a potential home to get a loan, or can I get approval and then shop (my preference)? For the actual loan approval you will need a physical address as the bank is approving not just you but the home as well. However, you can get a prequalification/pre-approval prior to finding a home and this is actually recommended. Get the collections cleaned up before applying. 

Thank you very much for any guidance and help. 

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You appear well on your way to getting your home. Your income and DTI (debt to income) are outstanding. You are tackling the baddies. The only potential thing I am seeing is you haven't listed any installment loan history like a car payment or student loan. Do you have any history with these? If not, someone else can pipe in to tell you a quick and easy way to get some installment loan history on your reports.

Not only are there 3% down loans available - there are zero down loans available that are not VA loans. NFCU offers such a product. BBVA Compass does as well if your home is in a low or moderate income tract (or for low-moderate income borrowers). To qualify for these your score will need to improve somewhat if those are your mortgage scores and are true FICO scores. Basically, Fako scores are useless. FICO 8 scores are useless. You need your Mortgage Scores, which are available here with a 3 bureau myFico report. I used this site to tell my loan officer (LO) my scores before he confirmed them exactly (i pulled them that morning). 

To get more accurate advice you should provide more information regarding any late payments and additional credit history and the like. There's actually a sticky thread in the mortgage forum about the info needed. Go read that, gather the needed info and post back here.

Sticky thread link: http://ficoforums.myfico.com/t5/Mortgage-Loans/Do-I-qualify-for-a-mortgage-Info-that-is-needed/td-p/381846 

Looking forward to it!

[Anonymous]

The internet ate my previous reply. 

Go read this, gather info, and post back here. http://ficoforums.myfico.com/t5/Mortgage-Loans/Do-I-qualify-for-a-mortgage-Info-that-is-needed/td-p/... Ugh, link won't work for me, but it's in the mortgage forum in a sticky thread at the top.

We need more info. 

Your income and DTI are strong. You should report a small balance on one card to maximize your FICO score. You look to be well on your way but might need to do a few more things to be completely ready. 

Look forward to reading your response.

[Anonymous]

Agreed with Joe_Bob -- get all your utilization down to 0% on ALL cards except for one card that will report somewhere between 1% and 8% on the report date.  This will maximize your credit usage part of FICO.  For some folks, this can help with up to a 20 point boost if you manage the proper usage number (0% on all except for 1, with that one reporting 1-8% usage on statement cut).

As for the derogatories, getting those off will help majorly (anywhere from 30-70 point boost).

I have no idea on the down payment and all that since I'm not mortgage shopping.

[Anonymous]

Thanks for the replies and the link. Here are the details as outlined in the thread linked above:

Mortgage Credit Scores:

EQ: 663
TU: 745
EX: 652

Credit Negatives:

EXPERIAN: 3 collection items from Texas Oncology Clinic ($582 total) - 4/15/2015 [unpaid]

                      1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid]

EQUIFAX:    1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid]

Gross Income: $150,000 annual

Source of income: Employment

Monthly debt payments: $0

Employment: W2, Salary, 10+ years

Assets/Reserves: Savings - $160k

Location: Austin, TX 78757

Property Description: Single family. New construction. 

Property Value: $404k

Occupancy: Primary residence

Transaction Type: Purchase

[Anonymous]

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@Anonymous wrote:

Thanks for the replies and the link. Here are the details as outlined in the thread linked above:

Mortgage Credit Scores:

EQ: 663
TU: 745
EX: 652

Credit Negatives:

EXPERIAN: 3 collection items from Texas Oncology Clinic ($582 total) - 4/15/2015 [unpaid]

                      1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid] This is the biggest problem I see and could derail the whole thing. The medical collections might could ride, depending on the type of loan and lender, but I'd advise paying to delete on all of them if possible - most especially the apartment collections.

EQUIFAX:    1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid]

Gross Income: $150,000 annual Strong

Source of income: Employment

Monthly debt payments: $0

Employment: W2, Salary, 10+ years Strong

Assets/Reserves: Savings - $160k Holy smokes! Awesome job!

Location: Austin, TX 78757

Property Description: Single family. New construction. 

Property Value: $404k

Occupancy: Primary residence

Transaction Type: Purchase

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I don't see any installment loan information. I'd suggest following some of the advise here in the forums on how to get one and pay it down immediately to nearly paid off but not uite to strengthen your profile.

If October is your timeframe there should be enough time for that to happen and to take care of the baddies. The apartment collection is the biggy here. It will need to be gone before you app for a mortgage or at the very least paid, but I would do everything possible to pay for delete.

Put a very small balance on one card and have the others report zero balance. 

You financial situation is very strong and there's a good likelihood that it can help overcome your weaker credit profile. The good news is that it looks like a non-FHA GSE conforming loan in Austin has an upper limit for the loan of about $424k. This would seemingly put you in a better position than a jumbo loan would.

All that said, there are many people with much more knowledge here than me. Good Luck!

P.S. According to Nerdwallet and going off the info supplied while figuring a credit score between 690-720 you should be able to afford a home up to $610k. If you have other debts not listed then that goes down accordingly.

[Anonymous]

Thank you very much Joe_Bob!

With respect to the apartment, I have proof of payment. It's 100% frivolous. I don't want to pay it twice. They just refuse to remove it. I have a copy of the bank check written to the apartments and event stamped as processed by their bank. There was no reason to turn me in. Would a copy of this suffice or do I really need to pay it twice?

Also, any confirmation on the 3% downpayment option?

[Anonymous]

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@Anonymous wrote:

Thank you very much Joe_Bob!

With respect to the apartment, I have proof of payment. It's 100% frivolous. I don't want to pay it twice. They just refuse to remove it. I have a copy of the bank check written to the apartments and event stamped as processed by their bank. There was no reason to turn me in. Would a copy of this suffice or do I really need to pay it twice?

Also, any confirmation on the 3% downpayment option?

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I would say dispute this with the credit bureaus and send a copy as proof of payment to have it removed. If they don't remove it you may have to at least threaten legal action against those reporting it to get it removed.

Yes, there are 97% LTV loans available. In fact, NFCU and BBVA Compass have zero down options. NFCU's is available so long as you qualify. BBVA's is for low to moderate income buyer or if the home is located in a low to moderate income tract, which is sometimes surprising depending on where the boundaries are drawn. I'm in escrow now and BBVA is my lender on one of these. The interest rate are higher because...nothing down. In your case you may want to consider putting 5-10% down to increase your chances of approval. In fact, it may be required. Only way to know is to talk with an LO from your target lender BEFORE applying (wait until you are ready - I spoke with someone at BBVA 1-1/2 years before applying so we could discuss everything. If a LO will not speak with you like this prior to applying they aren't worth your time - move on.

[Anonymous]

Excellent advice. Thanks again

[Anonymous]

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@Anonymous wrote:

Thanks for the replies and the link. Here are the details as outlined in the thread linked above:

Mortgage Credit Scores:

EQ: 663
TU: 745
EX: 652

Credit Negatives:

EXPERIAN: 3 collection items from Texas Oncology Clinic ($582 total) - 4/15/2015 [unpaid]

                      1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid]

EQUIFAX:    1 collection item for apartment balance due after vacating ($357) - 07/22/2014  [unpaid]

Gross Income: $150,000 annual

Source of income: Employment

Monthly debt payments: $0

Employment: W2, Salary, 10+ years

Assets/Reserves: Savings - $160k

Location: Austin, TX 78757

Property Description: Single family. New construction. 

Property Value: $404k

Occupancy: Primary residence

Transaction Type: Purchase

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I agree on paying the apartment collection. Even if the collection agency doesn't delete the tradeline, it will be better to have it show a $0 balance. The medical collections, I would leave alone. If the lender tells you to handle them, then you can address it then. 

Mortgage lenders use the middle score of the three, which makes yours 663. Mortgage scores like to see a good balance of revolving and installment utilization. Your scores are hurting right now by having all of your credit cards at $0 balance. The ultimate scoring goal for credit cards is to have all report at $0 with the exception of one. The one that you have show a balance should report between 1%-9%. 

If you do get a utilization loan, do a search for the "Shared Secured Loan Technique". This is through Alliant Credit Union. The experts over there show you how to use this loan and how to make the payments to get the maximum score. 

A lot of this also depends on your lender and the loan you choose. There are some lenders that require 580-600 for FHA loans, and some lenders that go as low as 620 for Conventional Loans. Because of that, it may be helpful for you to speak with a lender before opening an installment loan as you could take a hit from your Average Age of Accounts changing. The credit card adjustment you could do now with no effect.