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Established Member
Akosua
Posts: 46
Registered: ‎06-30-2013
0

PLEASE HELP!!!! CREDIT ISSUES!

I made a lot of mistakes when I first went to college with my credit, I did not know how to manage my credit and charged up a few cards and fell behind on paying them. I went into a debt management program in 2009 with all my cards except for my student loans and car loan. In April 2013 I finished paying off all my credit cards and applied for 3 cards to rebuild my credit. I also took out a new car loan with a low APR with my credit union around the same time. In January 2013, my credit was pulled by a mortgage company that a landlord was using to rent out an apartment my scores at that time was Equifax 676, Experian 649, Transunion 640. I signed up equifax scorewatch and it shows my current score as 651. The balance on my new car loan is $42,000 with a monthly payment of $700 + $50 disability coverage/month, only made 3 payments so far and its up to date with no late payments. My student loans are in deferment because I am currently enrolled in a masters degree program which I am paying cash for (no loans) and with an employers tuition reimbursement.  I currently have a CC from my credit union with a $500 limit which I pay off at the due date (took it out to help my husband also build his credit, he just got issued a SS# and has 0 credit), I also took a homedepot card for a purchase and paid it off within 3 months under a 0 APR promotion. I currently have a chase freedom card $3500 limit, $2000 balance which will be paid off in a month.  

 

My score watch shows 3 inquiries in the last 2 years which is inline with the current new accounts I have opened. It says I have 9 negative accounts but they're the accounts I paid off in the credit management program and they all show as  0 balances.  It also shows a collection account which was last reported on 04/19/2012 with a 0 balance, it was t-mobile bill for $ 678 that was sold to a collection agency, I settled it for $406 and it's listed as a paid collection.

 

I have a salaried income of $88,000 hut have averaged about $105,000 in the past 2 years. I've been with the same employer for 6 years and in a stable unionized job. MY DH has no credit history. He just got his greencard about a month ago and has only been working the past month and only earns a gross of $1920/month so I wont be including his info on the loan app.

 

I recently decided that I wanted to own my own home. There's a new construction townhouse complex that I am interested in, I am interested in an FHA loan and I have the 3.5% down payment now. I am working on saving up for the closing costs, the builder has a $7500 incentive if you finance with any of their two banks if you buy in the first phase of their construction by November.  My lease ends at the end of January so if I'm able to purchase and close before the end of decemeber then my first mortgage payment will not be due till Feb 2014. I am also ok in buying in the second phase because it has the unit that I really want and also my credit profile will hopefully be where it needs to be to secure a loan, so I can always get a month to month lease and move when I purchase. 

 

My question now is that with this brief synopsis of my credit profile, will qualify for an FHA loan? The home is $300,000. I am interested in using the builders bank (Wells Fargo) so I can get the incentive to use towards closing costs. I have not applied yet but plan to apply in October if my chances are good on securing a loan. At that time my CCs will all be paid off and my student and car loan installments will be my only revolving debt $750 +$195 (in deffferment till 01/2014) = $946/ month. 

 

Is it advisable to purchase now or wait till later?

 

What can I do to improve my FICO score? I want to be in the 700 range prior to loan application.

 

I am new to this site and value all your insight. Thank you very much in advance!!

Chase Freedom-3.5K, NY MCU- 500, Chase Sapphire Preferred- 5.7K, Discover IT- 2K, AMEX BCE-6K, Citi simplicity- 7K
Scores: Equifax SW- 719 (Nov 2013)

Valued Contributor
tooleman694
Posts: 2,297
Registered: ‎08-25-2011
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Re: PLEASE HELP!!!! CREDIT ISSUES!

If you get your scores into the 700s, conventional would be the better way to go.

Established Member
Akosua
Posts: 46
Registered: ‎06-30-2013
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

Thanks for your response! I'm confused, I'm I not eligible for an fha loan? Why would conventional be better? I definitely don't have 20% to put down
Chase Freedom-3.5K, NY MCU- 500, Chase Sapphire Preferred- 5.7K, Discover IT- 2K, AMEX BCE-6K, Citi simplicity- 7K
Scores: Equifax SW- 719 (Nov 2013)

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

[ Edited ]

Depending on your credit scores and other information, you may be able to get a conventional loan for a 5% or 10% down payment.  I do not know what you might or might not be eligible for, but the big reason that tooleman694 suggests conventional is because of recent changes to FHA rules on PMI.  With a 3.5% down payment you have to maintain PMI ($325/mo) for the life of the loan or until you refinance with another lender.

 

Also with FHA you may have two other problems.

1) You will have to look up the maximum that FHA will loan in your area.  Where I live, for instance, they only will loan up to something like $271K.  (https://entp.hud.gov/idapp/html/hicostlook.cfm)

2) With condo/townhome developments there may be additional rules regarding the % of units that must be owner occupied to qualify for the loan.

 

I am very much new to FHA rules and whatnot, so please consult with a lender and double check the information above.  Its only a starting point for you to ask more questions.  Good luck!

Frequent Contributor
swtneka
Posts: 486
Registered: ‎02-14-2013
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

[ Edited ]

If you GW those paid collections for removals you will help your score and plus FHA doesnt like any collections 2 years or younger

Established Member
Akosua
Posts: 46
Registered: ‎06-30-2013
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

0x47,

thanks for your response!!

I've been reading about the fha new PMI requirements but i've also read that to circumvent it, whenever I reach LTV ratio of <78%, I can refinance and go conventional. I can afford the 5% but it'll mean i'll have to save about 3-6 months more. I had planned to pay all the Upfront PMI at closing to avoid roling it into the new loan. as of now my front end ratio as calculated by me is 30.86% (already at upper limit) and back end ratio is 34.60% . The fha limit where I want to move to is $443,750 for a single family (middletown, ny). I only wanted to see a lender and have my credit reort pulled when I get to the upper 680 - 700 FICO range. My equifax is now at 655 from a 651 4 days ago. i dont even think I can get a conventional loan at this point. My credit report still shows 8 negative accounts, all of them closed and paid off in full but have mostly 30-days lates showing from 2009 and most recent late in March, 2011.  And a settled collection.

 

Until a week ago I thought I was stuck with that on my credit report but I just found out about writing GWs to get them removed. Still deciding whether to move forward with the GWs since the lates are over 2 years old. Will only do so if itll improve my credit score/picture priming me for a home loan.  Thanks!

Chase Freedom-3.5K, NY MCU- 500, Chase Sapphire Preferred- 5.7K, Discover IT- 2K, AMEX BCE-6K, Citi simplicity- 7K
Scores: Equifax SW- 719 (Nov 2013)

Established Member
Akosua
Posts: 46
Registered: ‎06-30-2013
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

My last late was in March 2011 on my credit report but the collection states that it was last paid in 02/2012 but i definitely paid it way before that in 2011. It was paid for deletion but the collection agency has yet to do that! Will this affect my chances?

Chase Freedom-3.5K, NY MCU- 500, Chase Sapphire Preferred- 5.7K, Discover IT- 2K, AMEX BCE-6K, Citi simplicity- 7K
Scores: Equifax SW- 719 (Nov 2013)

Frequent Contributor
frugalQ
Posts: 491
Registered: ‎03-23-2012
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

FYI....

 

there are 3% conventional loans available.  the minimum required score for those loans is 680.  i believe the PMI rate will be higher with the lower downpayment though.

Capital One Platinum 0/2.5K - AmEx Green NPSL - Amex Hilton HHonors Surpass 0/7K - Amex BCP 0/8.5K - Chase Freedom 0/3K - Discover IT 0/6.5K - LOC 0/2.5K
Community Leader
Senior Contributor
StartingOver10
Posts: 4,422
Registered: ‎03-06-2010
0

Re: PLEASE HELP!!!! CREDIT ISSUES!


Akosua wrote:

0x47,

thanks for your response!!

I've been reading about the fha new PMI requirements but i've also read that to circumvent it, whenever I reach LTV ratio of <78%, I can refinance and go conventional. I can afford the 5% but it'll mean i'll have to save about 3-6 months more. I had planned to pay all the Upfront PMI at closing to avoid roling it into the new loan. as of now my front end ratio as calculated by me is 30.86% (already at upper limit) and back end ratio is 34.60% . The fha limit where I want to move to is $443,750 for a single family (middletown, ny). I only wanted to see a lender and have my credit reort pulled when I get to the upper 680 - 700 FICO range. My equifax is now at 655 from a 651 4 days ago. i dont even think I can get a conventional loan at this point. My credit report still shows 8 negative accounts, all of them closed and paid off in full but have mostly 30-days lates showing from 2009 and most recent late in March, 2011.  And a settled collection.

 

Until a week ago I thought I was stuck with that on my credit report but I just found out about writing GWs to get them removed. Still deciding whether to move forward with the GWs since the lates are over 2 years old. Will only do so if itll improve my credit score/picture priming me for a home loan.  Thanks!


There are two MI's payable for FHA. 1) is the UFMIP which is the Up Front Mortgage Insurance portion and it is normally rolled into your loan amount. It is 1.75% of the loan.  Then there is the monthly MI payment which is equal to 2.35% of the loan amount (annually) divided by 12 to get your monthly amount due.

You are in the FHA approvalable range now for your credit score.

Frequent Contributor
austinguy907
Posts: 304
Registered: ‎03-03-2008
0

Re: PLEASE HELP!!!! CREDIT ISSUES!

conventional is the way to go w/o paying the full premium or rolling it into the loan under FHA.

 

FHA is now charging 325/mo for PMI??  i recall it being something more along the lines of a % of the principal and tacked onto the payment.  i went conventional through a CU and my PMI was only $58/mo and other lenders were quoting in the area of $100/mo.

 

since closing is ultimately going to come down to your DTI ratio... i would consider a refi on the car loan to lower the minimum monthly payment.  dis insurance is somewhat usless unless you're working in construction.  you really want GAP coverage which covers the vehicle to 100% of loan value vs total value from your ins company if you total it out.  typically GAP is only $200-400 one time charge for coverage.  

****REFI is only going to work in your benefit if you make some hefty payments to bring down the monthly payment under new terms.****

 

i would shop your husband around and get him a couple of secured lines through a local CU to get his report going and getting him a decent score going into the application process since normally married applicants have to include their spouse in the transation.

 

incentives are nice and luring when purchasing... however don't let it be the force pulling you into the transation.  there's several programs in many communities that offer perks.  also, does the community charge an HOA fee?  

 

to boost your score more once you payoff your CC's just charge a tank of gas each month on each one and keep PIF on them both.

 

since the developer is going through WF for their "preferred" financing you might want to shop around and compare total cost of ownership apples to apples to see if the $7500 towards closing is actually worth it at WF rates / fees.  in most cases you can get the seller to pay closing costs in the contract or they may allow up to $5K towards closing thus reducing your out of pocket at closing.

 

http://www.monitorbankrates.com/mortgages

 

 

Scores by lender CLI requests 4/15/14: EQ 760 / TU 755 / EX
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Scores by lender 4/25/11: EQ 705 / EX 743 / TU 735
Mortgage closed 5/20/2011!

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