FHA Mortgage need advice

Anonymous · ‎05-03-2009

DH and I would really like to buy a house by 11/09. We only have $1500 in savings right now and we make $7500 gross a month. Our debts are $1296 a month. Our utilization is high but is going down. DH has money in his 401k that he can withdrawal for a down payment. They are allowed 2 loans which he already has right now from his 401k one will be paid off soon and we could take another loan instead of a withdrawal.

DH credit scores are Transunion 614 and Equifax 608

Mine are Transunion 628 and Equifax 622

We had a couple years that were really bad and have now had no late payments in the past 17 months. I paid and settled somethings back in 2007 and really should have read here first. So there are lates and paid charge offs and stuff that I guess we can't do anything about.

DH has 2 accounts that have balances that are old and I am not sure if I should do anything about it right now or talk to a lender first to see if we could get approved.

One account is with the original creditor and shows as charged off bad debt but shows a past due amount.

The other is with a CA and shows the balance as past due.

He also has a medical collection that I am not sure if it is even accurate. I don't think it is. I will have to see what I can do to find out what that bill is for.

My transunion report shows 3 collections 2 which show as paid and one for Palisades/ATT which has a balance.

I also have on my accounts a Verizon account that shows a balance but not a past due balance. That account was paid to the CA in 2007.

My Equifax shows only 1 of the paid collections and the Palisades/ATT shows up under my open accounts with a past due balance for 120+ and the Verizon account is on there showing a past due balance and 120+.

There is also an old credit card that my DH had that he put me as an authorized user and I never activated the card. It show 2 30 days late. It was never late. Doesn't show as late on DH's reports and he closed it out after a few months when they lowered the Limit.

I am going back to work from maternity leave in 2 weeks and can start to add more to the savings. Our scores have been going up a little at a time as I have been paying down the credit card balances and since we have been making all payments on time.

DH bought a new car last week.

Do you think we could get approved if we apply in July/August if we both have a middle score of 620? Can we use the money from the 401k toward a down payment? Should I start to try to get these things cleared up now? Can we get approved if DH just financed a new car in April if we apply in July/August?

Sorry so long I just really don't know what to do and don't want to start something if we have a chance and it will hurt us.

Anonymous · ‎05-03-2009

What you need is a good LO that can tell you what needs to be done to be approved. You have some weak spots in your file, which you're aware of obviously It is likely your utilization that's keeping your scores low right, not the old bad stuff. Be very careful about taking care fo the baddies without a LO telling you it needs to be done. It can drop your scores and re-age the accounts.

I'm by no means an expert but it seems to me an expert would be very helpful in your case. The new car loan might be a problem. The 401k is fine for down payment, it's your money so you're technically just borrowing from yourself.

What area are you looking to purchase in and what price range? If the area qualifies for USDA, you won't need a downpayment. If you're looking at an FHA loan you'll need 3.5% down. Typically you need 12 months of good credit history and it seems you have that already.

Personally i'd talk to a LO now so you can have an exact plan in mind for what you need to do. Inquiries can hurt your score so i'd see if they would talk to you based on the reports you've pull and refrain from letting them pull your CRs.

Anonymous · ‎05-03-2009

Thanks for the reply. That is what I thought. That is why I haven't done anything about the remaining issues with our credit reports in case it would hurt instead of help. I am in Northern NJ. We are not in a USDA area. We would need an FHA. The hightest I was thinking would be $280,000. We could do the 3.5% now with the 401k but not the closing costs. I would need to build up the savings more for that or see if I could find a seller to contribute to the closing costs. I wish DH could of waited on the car till next year.

Now I just wish I could find a good LO in the area. Not sure how to find one that is good. I don't know anyone who has used one recently.

I had hoped to find one to talk to by end of June after I have had some time back at work and can add to the savings and pay more towards the credit cards. I had to cut back some while I was on maternity, but have keep everything current.

Anonymous · ‎05-04-2009

@Anonymous wrote:

Do you think we could get approved if we apply in July/August if we both have a middle score of 620? Can we use the money from the 401k toward a down payment? Should I start to try to get these things cleared up now? Can we get approved if DH just financed a new car in April if we apply in July/August?

Sorry so long I just really don't know what to do and don't want to start something if we have a chance and it will hurt us.

I would leave your credit history alone since you're already 620+ and you should get a nice little cushion as your credit card debt goes down. At least until a loan officer tells you otherwise. Your husband, worst case scenario, has a mid-score 608. Getting utilization down might be enough but it wouldn't hurt to list his bad marks on the Rebuilding Your Credit board. You could let them know your goal, 620 by July, and see if there's anything you guys can do to speed the process up a little. Good luck!