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Chance for approval? Low score, high income/down payment*UPDATE*

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seap74
Established Member

Chance for approval? Low score, high income/down payment*UPDATE*

UPDATE: We were just approved by AU for a conventional loan, but we had to put 20% down to make it work. Mid mortgage score right now 661. I would have waited a little longer to get the score higher, but someone else was making an offer on the house we wanted that day. I wasn't at AZEO yet due to waiting for reporting, but util was 2%. Now just hoping that the whole process goes smoothly until closing Smiley Happy

We would like to buy a home this spring, but have had some credit difficulties in the past. We are currently renting, do not want to re-sign our lease for a lot of reasons.

 

I currently make about $108,000/yr, I have a contract and will be increasing to around 200K in about 6 months.

 

Mid mortgage score currently is 627. I have a large bonus coming soon that would allow me to pay off the CCs, and possibly the smaller car loan, plus have a 20% down payment. Spouse will not be included in the mortgage.

 

Debts include:

Revolving CCs: $6500 (will be paid off)

Car 1 10K,  $280 monthly (could also pay off)

Car 2 28K $560 monthly

Car 3 23K $380 monthly

Student loan monthly $203

 

We had a problem a little over 2 years ago after I graduated from school and we moved to my current position. Spouse could not find a job for 6 months, so I had several lates/charge offs and my income at that time was not enough to cover everthing. All were paid off by early last year. The original date of the charge offs are almost 2 years ago now, but there were several. Due to stability of my job, much increased income, this is not something that will happen again. Everything both before and after the incident has been paid on time.

 

Looking to buy a house around $350-400K, with 20% down. DTI based on my current income if I pay all CCs and 1 car loan would be 16% before adding in the mortgage payment, this would be much lower starting with my new salary. Also, I think my credit scores will also go up once I lower utilization to almost all paid off (I've read to keep at least one TL with a few dollars).

 

Do you think it will be possible to get approved for a conventional loan or maybe FHA loan (the loan limit is what may prevent this)? We really need to get out of this awful rental. Moving to a better rental temporarily is not really a good option, as they are very expensive (2-3K), and most don't allow pets, which is non-negotiable. Thanks in advance.

7 REPLIES 7
Anonymous
Not applicable

Re: Chance for approval? Low score, high income/down payment

The problem is that you have such a tight timeline for buying.  You need to get the bonus (January?), then pay off the debts, then have the new much lower balances report to the bureaus, then pull your mortgage scores and see how they have improved.  All that could take a while.

 

Then you want to get pre-approved (or pre-qualified) and with that letter realtors will be willing to seriously helping you look for properties.  The house shopping process could and should take months as well.

 

It's hard to guess how much your score could benefit from paying down your CC debt, because you don't mention what your CC utilization percentage is.  Can you clarify?

Message 2 of 8
DollyLama
Established Contributor

Re: Chance for approval? Low score, high income/down payment

It's good to pay down that utilization and the quickest, (but always let one revolving have a very low balance report), rest zero balances. 

 

What I think is holding down scores significantly is the lates and charge offs. Now is the time to do the goodwill saturation mentioned on the forums, and get as many removed as you can. Might be a tad harder on the charge offs as you have already paid them and have no leverage for them to "get their money" for a pay for delete. Start with the lates asap.

Message 3 of 8
Anonymous
Not applicable

Re: Chance for approval? Low score, high income/down payment

Mortgage scores are a bit trickier to "game" than FICO Score 8 is, but it's doable.

 

You want to definitely play the AZEO trick with utilization as soon as possible.  Make sure not to report ALL credit cards as $0.  That's easy to calculate yourself.  AZEO info in my signature link (11 rules).

 

On the installment loans, it's more important that your overall installment utilization get down below 8.9% if possible, but never $0 across all loans.  I don't think this will make or break you, I bet your CC utilization is blowing your scores the most -- maybe post ALL your credit cards individually with current balance and limit each?

 

Lastly, you want to make sure you have a good down payment to "buy" the best rate possible.  CC utilization first, down payment second, installment utilization last.

Message 4 of 8
sid33
Regular Contributor

Re: Chance for approval? Low score, high income/down payment

Will your current landlord allow you to go month-to-month to allow you a little more wiggle room? Just for an extra month or so?

Message 5 of 8
seap74
Established Member

Re: Chance for approval? Low score, high income/down payment

Thanks for all the input so far.

 

Some answers to above questions:

- utilization is 91%, haven't been paying attention to statement dates since I wasn't applying for anything. I will pay off to AZEO.

- yes, we could potentially stay here a short time longer if needed, either month to month or pay 2 months rent to get out of the lease. I'd rather not. Was hoping to already be moved and settled prior to starting my new position.

- Tried goodwills last year. None of them worked. So basically only time can help that. 

Message 6 of 8
seap74
Established Member

Re: Chance for approval? Low score, high income/down payment

Update:

I paid off all the credit cards, although unfortunately I couldn't get to AZEO because they added on some interest when the statement cut. One had a $0 balance, the other 3 had small balances. This brought utilization down to 2% on Equifax and Experian, but Transunion still hadn't updated two accounts, so was showing a 56% utilization with one credit card still maxed out. 

 

Scores are from MyFico. New Mortgage scores are:

Equifax: 627 -> 661

Transunion: 607 -> 613 (2 accounts weren't updated, still showed high utilization).

Experian: 633 -> 676

 

I'm pretty happy with the 1 month increase. Hopefully next month will show some more improvement with time and AZEO. Some inquiries will be aging off. I'd really like to get to a 680 mid score within the next few months if possible. I'm not sure what else I can do. I can't get rid of any more baddies. The only possible thing I can think of would be to pay down a car loan, but I don't know if that would even help. It's currently showing 60% paid. Would getting it below a certain % help?

Message 7 of 8
Anonymous
Not applicable

Re: Chance for approval? Low score, high income/down payment

There are almost NO data points on auto loan "utilization".  I am actually testing utilization percentages now with a boat loan that codes as an auto loan but my stupid loan takes 3 months to report each payment, so it's slow as heck.

 

You MAY see some benefit from dropping below 48.9% loan balance, you should definitely see some benefit going below 8.9% left to pay.  But that's conjecture.

Message 8 of 8
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