04-11-2013 12:21 AM
A little history..I began working on my credit at the end of last year; at the recommendation of a local credit unions mortgage rep, she advised me to clean up all negatives, and open a few trade-lines; making small purchases and paying them off, in anticipation of qualifying for an FHA home loan. So I did exactly as advised cleaned up everything and opened my first trade-line, a month later I opened my second and third,and between the 5th and 6th months I opened 3 more. During the process of getting accepted by some, I also was denied by others, and in 7 months the credit union ran my credit 3 times to check on my progress, I also shopped around with 2 other mortgage companies around the same time receiving 2 more inquiries. I signed up and completed the first time homeowners classes thus gaining another inquiry..So where I am now is; 7 months later; 6 mortgage inquires, 1 Verizon, and 14 credit apps while trying to build credit (6 resulting in trade-lines established), 6 within a 30 day period.
Present day..I was preapproved by that same bank about two weeks ago with a middle credit score of 651 for FHA financing, the loan officer at that time informed me that everything looked good credit wise, and I just needed to keep the amount of the home as close to 80,000 as I could get it, after that I began looking for a home. I found the perfect little house submitted an offer; in the end we agreed on 85,000 with 1200 closing cost; I also have 8,000 to put towards it. After everything was signed and submitted to the bank our contract began. The loan app was submitted to underwriting 3 days ago; on the third day I received notice that it was denied due to too many inquiries, and new credit within 6 months, and debt to credit being too high for that house (I make 21,000 a year, and have absolutely no other obligations other than rent and utilities, and my credit report is free of any debt). What I don't understand is why would the loan officer advise me to apply for and establish credit, and allow me to try for a mortgage loan if I needed to wait? And if it was going to hurt me in the end, and also why would she tell me to look for houses in that price range if it wasn't within the limits; if she had have given me the correct amount I was eligible for I wouldn't have even attempted to step outside of that. . I have never bought a house before, so when I came to her 7 months ago I was completely new to all of it; so I did everything she told me I needed to do to obtain it; IM very confused right now and IM not really sure what my next move should be, has this basically shut my home shopping down for the remainder of the year? Any advice is appreciated.
04-11-2013 12:54 AM
04-11-2013 04:47 AM
04-11-2013 03:12 PM - edited 04-11-2013 03:45 PM
i spoke with 3 lenders in the past 6 months. I told them that I have 2 cc (been rebuidling my credit with these 2 cards) and all 3 of them advised me not to apply for any more card. They all said 2 is plenty. Also, they all advised me to keep the ratio of each card at 10%.
14 is a lot in such a short period. ALso, I'm surprise that your credit scores remains in the 650s after 20+ inquiries.
04-11-2013 03:37 PM
The loan officer told you to apply for credit, but not 14 times. lol No wonder you have all those inquiries on your report and in a short amount of time. That is a bad sign.
04-12-2013 05:13 AM
I am just going to share this as it was my experience when just learning about the mortgage process. Inquires don't really matter in the grand scheme of things that much, what matters is how old they are and how many were done in one shot. The other important factor is what happens to your average age of accounts when you acquire that new credit. If your inquires are all less than 6 months old or you have a bunch just short of a year it can make a difference and can be seen as you looking for credit to help you out of a bind. The other important part is the average age of accounts, you are going to need a good two year payment history no matter what your score is, this can be a factor for denial as well. Let everything age a little more and as things ripen you should be fine to go at it again.
One thing I would reccomend is finding what your front and back end DTI is, this is what they were refering to when they denied you. IMO your best bet is to know what your doing for yourself and figure out what you can really afford based on what your actually paying in bills and not just what shows on your reports. This information is your best friend when shopping for homes IMO because only you really know what you can afford. Just remember that even if you think you can afford more it cannot be more than the max DTI for your situation.
04-12-2013 07:28 AM
Well, I can tell you that underwriters can and sometimes do deny loans they might otherwise approve simply because they don't feel "right" about the file...and one of the things that can bother them is seeing to many inquiries...regardless of credit score. To them, it looks like the customer will apply for credit at any and every opportunity and that could be a recipe for disaster.
Every file is different, but UW will make people write a LOE for even 1 inquiry that pops up during the loan process that wasn't there in the beginning...just imagine how they'd feel about multiple inquiries, even if they haven't dragged the score down much. It just doesn't look good.
04-12-2013 11:01 AM
I have a lot of inquiries which worry me. Loan officer said he never saw so many. He told me to say I was rate shopping for a mortgage and applied for some credit around Christmas time and to put that in writing. I have plenty of cash and will be making a rather large downpayment. Basically, I have to because my income is very low. Doing a 15 year FHA. Credit score is around 680. Utilization is under 10% and I could pay off everything if I wanted to but I want to maximize my score. My file was just sent to underwriting. Loan officer said it may take up to two weeks.