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Preparing Credit for a Mortgage

Preparing Credit for a Mortgage

Hi Everyone!!

 

This is my first major post! I’m excited and terrified at the same time, lol! I’ve been reading all the excellent advice given so I thought I’d list my specifics and get some experts to help us get our credit in order. 😊

 

My husband and I are serious about getting our credit in order so that we may purchase our first home within the next two years. We’ve done the mortgage simulators and based on our income, it looks like we can afford a max house price of $200,000. We know our best option is an FHA because of the lower credit requirements and lower down payment. Below is our information below. I would appreciate any feedback you can offer!!

 

  1. Mortgage Credit Scores:
    What are your fico MORTGAGEcredit scores for each mortgage applicant? Just pulled both of our 3B reports today. Mine EQ 514, TU 587 Ex 553

 Husband’s EQ 537, TU 571 Ex 556

 

  1. Credit Negatives:

We filed BK in September 2012 and it was discharged in January 2013. Then came 2015 and we were hit hard when my husband’s job went through a very rough time. As a result, most of what we had accomplished went down the drain and now we are rebuilding the rebuild.

 

Husband’s Negatives:

Bankruptcy Filed 9.26.12

Discharged 1.3.13

 

Sprint Collections Acct Unpaid $364 – Note-this account is listed twice on TU with 2 separate collection agencies. How can they do that???

DOFD 1/17

 

CapitalOne Collections Unpaid $372

DOFD 8/16 TU & EX, 11/16 EQ

 

CapitalOne Collections Unpaid $688

DOFD 5/16 TU & EQ, 8/16 EX

 

Dermatology Specialist Collections Unpaid $190

Only listed on TU DOFD 9/15

 

Unpaid Medical Bill $50 not even sure what it is DOFD 3/14

 

My Negatives:

Bankruptcy Filed 9.26.12

Discharged 1.3.13

 

Cox Communications Collections Unpaid $367

DOFD 5/17

 

Barclays Card Collections Unpaid $810

DOFD EQ 2/17, TU & EX 9/16

 

Sprint Collections Acct Unpaid $165 –

DOFD 12/16 not on EX

Progressive Collections Unpaid $255

DOFD 6/16

 

Legacy Crossing Timberland Apts Collections Unpaid $1150 Currently Disputing and has been removed from EX

DOFD 6/16

 

  1. Gross Income:

Our gross income this year is $85,000.

 

  1. Source of income

Our only source of income is our full-time employment.

 

  1. Monthly debt payments

Our monthly debts are as follows:

Total Credit Card Debt: We are maxed out on almost everything. Total CC debt is about $3800 that will be paid off in the next 6 months.

My husband has 2 cc, Kohls CL $300 & Credit One CL $400

My CCs: 2 CapitalOne’s CL $2300, Merrick DYLV CL $750, CareCredit CL $700, Indigo CL $300 and a Self-Lender account $550

Car payment $460 per month. Will be paid off in July 2018

Car payment $260 per month. Will be paid off in 2020

Student loans: We have loans totaling $67,000 and just did an IBR application. Payment estimate was $350 per month. Waiting for approval.

 

Our AAoA is 5Years 10Months

 

My last 30 day late payment on any of my credit cards was December 2015

My husband’s Kohls payment was 30 days late in November 2016

Husband’s Car pmt was 30 days late July & August 2016 & March 2017

My car payment was 30 days late in November 2016 & March 2017

 

  1. Employment:

Type of employment: Both of us have full-time jobs 

How long: Me 10.5 years. My husband 9 years

 

  1. Assets/Reserves:

2015 was a very rough year for us and we are just now getting back on our feet so we are just starting to rebuild our savings. Our savings goals are $7,000 down payment, which is 3.5% and $5,000 in savings. Is this enough? Should we be saving more?

 

  1. Location:We will be buying in Omaha, NE. The property tax rate is 2.097.

State: Nebraska

County(s): Douglas

City or zip(s): Omaha

 

  1. Property Description:

Single-family home with an attached 2 car garage

 

  1. Property Value

Our max purchase price is $200,000, but we’d like to stay at or below $185,000. Mortgage calculators I’ve used say that is affordable for us. Is this true?

 

  1. Occupancy

This will be our Primary residence

5 people, My husband and I and our 3 children

 

  1. Transaction Type:

Purchase

 

I’m sorry this was such a long post, but I wanted to give as much detail as possible to get the most accurate advice. Please let me know if there is any other information I need to provide. Thank you all for reading!! Smiley Happy

4 REPLIES
Valued Contributor

Re: Preparing Credit for a Mortgage

You both need to get your credit card utilization down using the AZEO Method and recheck your scores then.  http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/The-AZEO-Method/td-p/5058287

 

Also any chargeoffs that show an active balance are hurting your scores majorly, so get those to $0 somehow.

FICO8FICO8Visit:
03/1710/17My 11
Rules to
Credit
Rebuilding
550EX
570TU
559EQ
710EX
699TU
734EQ
Contributor

Re: Preparing Credit for a Mortgage

Whatever y'all do, you've got to get a handle on the occurence of derogatory items hitting your history.   

 

I don't ordinarily like to chide folks on this board, but there's a very fine line between financial hardship and financial mismanagement and y'all are really tight-roping it.  Whatever you do, be sure that you verify whether your collection account items are accurate and personally, I'd recommend satisfying them so that you no longer have any creditor that has the Right to report anything derogatory in your account profile.   Combine this behaviour with making all your credit card payments on time and a discipline to pay them and keep them down below the 50% utilization ratio and you'll be set when the time comes--even if it's as early as Spring or Summer of 2018.    Derogatory events will hurt less over time--especially once they pass the 12 month mark and moreso once they are > 24 months old, so keep certain your accounts are always paid on time.

 

On another note, where is your down payment coming from?   

 

If you and your husband do not plan to borrow from your own 401k plan (company sponsored or otherwise) I think you are overlooking what could be the easiest way to save for your down payment as deposits to your retirement accounts can be made tax free.   Always consult your tax advisor, but if y'all tucked away $15,000 of the $85k you earned, not only would your tax liability be LOWER than it is now, but your $15,000 you saved last year would likely to have grown by 20% and be $18k now.    Having the ability to borrow against your retirement savings isn't always a good idea, this is one instance where it's a great idea as it allows you to borrow from yourself (you can reduce your future investments to your 401k account a little if it makes your monthly budget too tight) which means you'll pay yourself back in interest, but you'll have that headstart of the investment in your home that you can pay back through work payroll deductions in the future.   (Sure there are opportunity costs of NOT having your retirement funds invested fully, but this is just a short term issue and shouldn't matter)

 

Don't lose focus and congrats on honing in on the goal of home ownership. 

__________________________________________________

Licensed NC Mortgage Loan Originator

Re: Preparing Credit for a Mortgage

Thank you! You are absolutely riight. We are working hard to correct our spending habits so that once we get our utilization down, it stays down. 

Re: Preparing Credit for a Mortgage

Thanks! I hadn't heard of that method before.