Getting a Mortgage with just a thin credit history

[Anonymous]

Hey everybody,

I apologize in advance if these are stupid questions... I came from a somewhat bad score, after moving overseas about 10 years ago. I've been working on getting my credit score back up, had a repo from 8 years ago coming off my report and i am now back up to 770/735/750 (Fico Score from myfico), even though with just a thin credit file.

I am starting with a new Job in April next year, and i am going to move back to the Florida/Melbourne Area in Summer/Fall. My plans are to buy a house when moving back, instead of paying rent. My question is if i actually would be eligible to get a Mortgage?

My Mortgage scores, according to MyFico are: 739/739/735

No Negatives, except
- Thin Credit: 1 Secured, 1 unsecured CC reporting. No Loans, but i am planning on getting a car loan of around 5k next year summer, probably one months or two before getting a mortgage (unless you tell me that it would be wise to get a car loan AFTER i get a mortgage).
- Currently 8 Months of established Credit. By the time we would like to buy, we would have 16-20 Months of History
- Average Age of Accounts is 4 Months (just got an unsecured AMEX). By the time i am ready to buy, it would be probably 12-15 Months.

Gross Household income of ~80k from my Employment. My wife would be "stay at home" mom.

My Monthly Dept (other than rent, currently) would be car Insurance for 2 cars and a car payment. All together around $600 a month. Credit Card utilization is usually below 9% and PIF every month. I plan on keeping it that way. Other than that, we would have the usual monthly payments like cellphones, internet, tv, etc...

Again, we are planning on buying somewhere in the Melbourne, Florida area. Preferably a single family house, in the 150-180k price range. Since moving from one continent to another costs a lot of money (go figure), we plan on putting down a 15k/10%ish down payment if possible. Compared to the average rent in that area, we were thinking about getting a 15 or 20 year mortgage, and still may be able to pay it off even sooner. In that scenario, we would be at a 30% DTgrossI ratio.

I do have a savings and checkings account with SDFCU, as well as a credit card that i am using once a month, just to garden my credit history. I am planning on using them as my everyday checkings account when i am back in the US. I am also thinking it would be best to get a mortgage with them as well.

However, since i have a decent score but a pretty thin credit history (and my wife not having much of a history at all), i wonder if i would actually be able to get a mortgage at all. Also, by the time we make the move i would be employed by the company for about 6 months. I do kinda work in the same profession for quite a while though:

- Being in IT since 1999
- Being in System Administration for an IT company since 2009
- IT System Administration & Project Manager for an IT company since 2012
- IT Manager for a logistics company since 2015
- Going to start as branch Manager (Projects/Operations) for a exhibition services company in 2018.

So... since being able to purchase our own home is one of the major milestones that we are trying to accomplish when moving back to the US, i am wondering what my chances are. I am concerned that we might be rejected for years to come with that thin credit file of mine.

Any thoughts?

[Anonymous]

Approved for sure.  Save some cash for a good sized down payment and go to the mortgage lender of your choice.

Thin file doesn't matter as long as your mortgage FICOs are good and your DTI is within approval range.

[Anonymous]

Thanks for the info. That sounds assuring

Like i said, intercontinental moves cost A LOT of money. Shipping all our stuff to the US alone is a 5 digit figure. Then we also need 2 cars (plan here is to buy one cheap 3-4k daily ride cash, and spend 6-7k down/5k car loan on a decent used car for the family. I am also trying to keep around 10K in my savings, for "just in case" situations like a car breaks down, washer/dryer goes out or medical emergencies.

That would leave us with roughly 15k - between 8 and 10% - down payment. Do you think that would be enought, or should i bite the bullet and try to cough up 20% down?

[Anonymous]

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@Anonymous wrote:

Thanks for the info. That sounds assuring

Like i said, intercontinental moves cost A LOT of money. Shipping all our stuff to the US alone is a 5 digit figure. Then we also need 2 cars (plan here is to buy one cheap 3-4k daily ride cash, and spend 6-7k down/5k car loan on a decent used car for the family. I am also trying to keep around 10K in my savings, for "just in case" situations like a car breaks down, washer/dryer goes out or medical emergencies.

That would leave us with roughly 15k - between 8 and 10% - down payment. Do you think that would be enought, or should i bite the bullet and try to cough up 20% down?

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For most mortgage approvals even 5% is fine.  But...

In my opinion, with the housing market as "hot" as it has been, I would do 20% for peace of mind.  Housing corrections can occur at any time, and the stunning increase in housing prices since the last correction leads me to believe that if I was going to buy a home, I'd want as much equity built-in as possible so if I had to exit my home position, I wouldn't be upside down (by much) in the event of a correction at the same time I needed to move/sell.

But that's just me.  You will get approved with 5% down for sure.  One thing I'd suggest is see what the minimum down payment is and do that, get your home, and then live cheap and thrifty until you get to 80% LTV so you can cancel PMI which is the craziest mistake people make in their entire lives in terms of paying forever...  Get rid of PMI as fast as humanly possible and roll the savings into your emergency savings.

Again, that's just my opinion -- lots of folks have no issue refinancing 3x in their lives and paying PMI for 40 years.  Keep in mind that PMI on a $150,000 home is "only" around $100 a month, but if you invest $100 a month at 7%, that's $120,000 saved over 30 years.