Preparing for FHA or Conventional Loan Application

[jay09]

New to the forum but appreciate all the great advice I've read on the various threads and hoping I could get some help with my situation. Equifax (myFico) is 643, Exp 600 and TUnion 648(D). I am self-employed (10 yrs) and would like to purchase a home by April for a number of reasons but mostly because by monthly payments from a well-paying client will come to end at that time and think my application will be stronger if I can show these regular monthly deposits. I would like to apply for FHA but I have lates on a closed Sears account for the first part of 2012. I was on a payment plan paying $126 a month during that time and thought the plan would bring my account up to date but it was still being reported to the CBs as late. I'm thinking about writing a goodwill letter to see if they will remove the lates but I'm not optimistic based on the conversations I've had with Sears. I've read that FHA may disregard a late payment in the last 12 months if you have a high enough credit score. Is it possible for me to get my score up to 700+ in a few months? All the simulators on the CB sites state the fact that I have no open credit/revolving accounts is hurting me. All I have is an auto loan opened in Aug 2012, student loans in deferment. Several collections but all paid off and two state liens, also paid off. Is it worth opening an unsecured credit card to try to get my score up? Or will the ding from applying for credit make homebuying this spring even further out of reach?

[JM-AM]

Late payment early 2012? When in 2012?

Opening a credit card may give you an initial ding in your score, but very possibly it could increase your score since you have no revolving debt.

Your FICO score is approvable now, just depends on the type of loan you are seeking. Since you mentioned FHA I am assumming you would like to go FHA. The only issue is to know your other FICO scores, as your middle score is the one they use to approve you.

[MovingForward_2012]

Opening a new line of credit 120 days out will not require a letter of explanation typically. I opened a third line of credit late December to use for furniture after closing and I am currently in the underwriting phase. My loan officer told me as long as I don't use it until after closing, it will not affect the mortgage app process negatively. I do agree that opening a line of credit now will positively affect your score by the time you app for a mortgage in the spring. Make sure to pay it down to zero to 10% of the limit before the statement cuts so that the low balance reports. A credit card is considered maxed out at 90% so I wouldn't charge more than 80% every month and be sure to pay at least 70% before the statement cuts.