Mortgage Loans

[iwannahouse]

Hello!

I am brand-new to this board.  DH and I want to buy a house next Spring (5-7 months from now).  I'm wondering what I can/should do to improve our credit score, and what is too late to change. 

A little background:

We have two car loans-- one for a new car we just bought last month (YIKES!).

We each have credit card debt- we have gas cards, dept store, etc that have zero balances and/or are pif each month.  Major credit cards- we each carry two cards with a balance, each at around 60-80% util, and two cards with 0-10% util. (probably total balance= 20,000 and total credit on the major cards=45,000--- just a very quick estimate)

We have no lates at all

We each about 10-12 yrs credit history

I don't know our exact scores-- which I need to find out.  But- I think mine is around 650 or so and dh around 750.

Other than paying down our cards, what should we be doing to get our score ready?  I assume we want to focus on the cc and not on the cars?  Is it too late to ask for a cli to change our uts?  Will that show as a hit on our credit and look like we are getting too much credit?

Thanks in advance!  I just found this board and have already learned so much!

iwannahouse

[creditrecovery]

Hi iwannahouse,
I am not a mortgage expert, but one of the first things I would do is pull both of your credit reports to make absolutely sure that you don't have any surprises on there that you don't know about. It is amazing what kind of things that show up on the credit reports.
For upping your scores quickly, usually utilization on CC's below 10 percent will get a pretty decent boost.
I think also that more than credit scores would be evaluated, like DTI.
I am sure one of the mortgage experts will chime in here and give you some more advice.
Good luck and keep us posted!

regards,
creditrecovery

[iwannahouse]

We've pulled both of our credit reports from the three agencies (we did the free report/year), but only 'bought' one credit score each.  So, I don't really know where our scores are.  WHen is the best time to pull our scores?

Our reports looked just fine- except our new car purchase is not showing up yet.

What else should we be doing now?

Thanks!

[iwannahouse]

Another question- we do not have a ton of $ in savings b/c we are trying to pay down cc.  Will that work against us more than the cc balances? 

We are planning on doing 100% financing.

[ShanetheMortgageMan]

While those "free reports" are a good source of info on your credit report, the scores that come with it are usually the FAKO scores.  For my clients the only place I recommend to get accurate scores (without me pulling their credit) is here at myFICO.com, 99 times out of 100 the scores are identical to what a mortgage lender would pull.

Reserves aren't needed for FHA, Fannie Mae's MyCommunity Mortgage, or Freddie Mac's HomePossible Mortgage.  FHA has a loan limit (found at https://entp.hud.gov/idapp/html/hicostlook.cfm), and MyCommunity/HomePossible both require you to buy in a low-to-moderate income census tract (you can punch in an address at http://www.ffiec.gov/Geocode/default.aspx and it'll say if it's low, moderate, high, or upper) or make no more than 100% of your counties median income (which you can check at https://www.efanniemae.com/sf/refmaterials/hudmedinc/index.jsp, some "high cost" areas/states permit you to make more than 100%, at the bottom of that page it'll list those areas).  There are some other niche programs, like Bank of America's Community Accommodation and Community Commitment program, that don't require reserves either, but are limited to certain states and you must either buy in a low-to-moderate income census tract (see the ffiec.gov link above) or you can't make more than 80% of your county median income (the efanniemae.com link above).  For a few more months, areas affected by Katrina/Rita are automatically eligible for MyCommunity/HomePossible.

Not having reserves (what you are calling savings) doesn't mean you can't qualify for other programs though, it just means that the probability isn't as high.  If you see Becki's thread you can see an explanation of reserves, and other items such as 401k's, IRA's, retirement accounts, stocks, bonds, CD's, or pretty much anything that is liquid can also be considered as reserves.

[iwannahouse]

Wow!  Great info!  So, our FAKO scores are maybe a bit higher than the real thing?    I guess we should buy the real thing, then.

We would like to go through my credit union for the mortgage-- both car loans (each at 5.5%), one cc with a 10,500 limit are through them.  They offer 100% financing with no PMI.  But, I'm not sure about getting approved.

I have over $40,000 in a 403B, but I cannot touch it.  Does that help in any way for reserves?

Our DTI needs work- but that is why we are trying to pay down the ccs.  The car payments will be in the dti no matter what, along with student loans.  UGH!  Also- dh has been trying to get a new job in his field, which will pay more, but it is very competetive right now.  The house is based on the plan that he would have a new job as well (although it may happen with or without it!).

We are looking for a house around 120-135 max.

Thanks!

[iwannahouse]

Our house would be well below the max for our area.  But, we make just above the median income (not by a lot, but it is more). 

[ShanetheMortgageMan]

Yeah FAKO scores seem to be anywhere from 10-50 points higher than your real FICO scores.  I think you can use the coupon code of CPPSAVINGS for a discount on the credit reports here at myFICO.com.  It doesn't hurt to call your CU up to find out what type of credit requirements they have for 100% financing, CU's usually prefer strong credit, which you appear to have, so I think the oods will be in your favor.  Whatever portion of your 403b is 'vested funds', 70% of that can be used towards your reserves, I'd suggest calling your 403b administrator if you aren't sure what portion is vested.