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12-19-2012 01:16 PM
First off, Ive been reading the posts in the mortgage section for about a week now, gathering all the information I can. Here is my situation...
My husband and I spoke to a lender about a certain house we were looking at. However, we werent aware that my husband's credit dropped.
Only negative items that showed up, were a high balance credit card, a 30 date late charge that just happened earlier this month, and an account that showed up, but lender said it was from almost 3 years ago, so they have no idea why they were just reporting now. So my lender told me to get the credit card balance down to a 10% usage, which I just did, and to pay off that late balance and see if I could have it removed....well, I begged and plead with the company, and they gave me a paid in full letter, but they absolutely refused to take that late payment off of my husbands report....Lender told me dont even touch that account that was from almost 3 years ago because it would just renew the time.
My husbands credit was flawless back in August; He had a 730 credit score. However, when the lender pulled the other day, it was a 561. We were devastated!! He told us he will check again at the 30 day mark, which will be january 11th and see where to go from there. He told us to have at least $3k in the savings and dont touch it.
So I have several questions....
Will his score go up now that the credit card is paid down and that we fully paid off that late payment account? Our lender said we just needed to get up a 640 in order to get what we want, which was lender-paid closing costs.
I have been thoroughly confused on this no deposits after you get approved. Both of our checks (both military) go into our shared checking, however, his name is only going onto the account. I know that money needs to be seasoned so that there are no reprocussions. Do we need to just open another checking account, soley for him before we apply for preapproval? Or leave it where it is? I ask this because we use this checking account for all of our expenses (gas, groceries, bills, misc stuff) and there is a lot of movement within this account, as we have a tendency to transfer money too.
Should we redirect our direct deposits into another account and just have an allotment going into this one checking so that it shows we have some money going into it?
Im just getting confused as to what precautions to take BEFORE applying for our loan. We are doing a waiting game right now, so I figured I would make the best of it.
We are using a VA loan on this house, as we already have another VA loan out on the house we live in now, but we will be renting it out. He has a 2nd tier entitlement, so we're ok there. Also, the lender has agreed, if we got approved, to pay the closing costs.
So considering that the closing costs will be covered, what exactly are we suppose to be reserving? We have $3k now in the savings, and $9k in the IRA that we aren't going to touch, and we will also be using our tax money, but wasnt for sure if we should deposit that, or what. Its confusing because I see certain situations on this board but most people are coming out of pocket for closing, and we arent, and we also will have our VA funding fee rolled into the loan.
12-19-2012 01:26 PM
I wouldn't open a new checking account just for your direct deposits... These are seen as regular deposits and are expected by the mortgage company. The tax refund will only require a simple LOE for that not to be an issue. Mainly what they are looking for would be a large deposit that is a one time deposit that can't be sourced.. They want to make sure that you do not take out a loan just to show the cash.
As far as the reserves - since they will be covering your closing costs - they will be looking for a couple of months worth of housing expenses as well as any down payment that may be required to be available either in your savings or retirement account.
The biggest issue will be the new 30 day late on his credit report. You really need to hope for a GW deletion of that one indiscretion. That is the biggest reason for the sudden score decrease.
12-19-2012 01:29 PM
Thank you! Now as for the account usage, what do we do about that? I mean, we go out to dinner, I coupon all the time, bills, gas, you name it, come out of that account. So do we need just to pull money out and use cash for everything?
12-19-2012 04:55 PM
OP, I am also active military and my LO instructed my wife and I to don't transfer money between accounts, ect. We have 4 checking accounts between us and another 2 savings. We have one account dedicated strictly to bills. We transfer money around during the month like crazy for different purposes. I have concluded that the reason they don't want you doing this is because it takes the Underwriters more time for find each transaction from the different accounts, they wanna be lazy basically. I have not changed my transfer of money to different accounts as this is what keeps my finances in order. If they don't want to do THEIR job, I would find another lender. Especially when theire probably chariging you a point or more to originate the loan in the first place.
12-19-2012 05:46 PM
12-19-2012 05:49 PM
You will find a wealth of information here on myFico! I am going to suggest that you start the journey by reading the following threads:
That will give you a great place to start! Also you want to opt out first before contacting these creditors... to opt out go to: www.optoutprescreen.com
The next advice I can give is to contact and deal with each of the two creditors one by one. Best of luck and if you use the search function to search for each of your creditors you can see how others have dealt with them successfully in the past. Best of luck!
12-19-2012 10:39 PM
I started researching stuff on the repairing your credit and since then, I have emailed a GW letter to the company who reported the late payment. We shall see if it works!
Also, I know we can't get a mortgage with a 561, hence why we were told to do all of this to get our scores up. Im not giving up on our dreams just yet....I see people everyday boost their credit and get the mortgage they want. All it takes is patience and a lot of hard work.
Thank you for clearing up the bank account issue. I was rather confused, so hubby and I will continue to use as normal so we don't do anything to raise a red flag.
As for the weird charge...hubby knows what it is, and it's from 2009 and just reported in april of 2012 as a collection, so we are going to write a letter of explanation just in case the underwriter needs it, but as for dealing with it....lender told us don't touch it til nothing else that I have tried, has worked.
We're just hoping with all of the changes we did, that we can get the score back up by the end of January.
12-20-2012 10:07 PM