We put our future in your hands.....Please help us make the right decisions

[Anonymous]

    My wife and I want to qualify for a $300,000 mortgage within a year and we need some good sound advice. I make about $100,000 dollars a year and my wife doesn't work because we hope to have a child within a year.I recently started establishing a credit history about a year ago. All of the credit in my name in hopes of first me establishing a good history and later my wife being able to be added to my existing accounts or me helping her by cosigning when the time is right. My current Equifax score is 671 and with a $800 high and a $300 high on revolving accounts, I was recently approved for two more cc's with $3500 and $750 limits. I plan on keeping my utilization well below 10% and we have no auto loans. I anticipate my score will increase if I continue to make make my payments on time. I have listed a snapshot of my overall credit below: 

1. Bank of America Visa                     $800 high    Balance0          Opened Aug 2007......Never late

2. Orchard Bank MC secured            $300 high   Balance $70      Opened Oct. 2007......Never late

3. WaMu Visa                                     $3500 high Balance 0          Opened May 2008..Will never be late

4. Cap One MC                                  $750   high  Balance 0         Opened June 2008.Will never be late

  Is this enough of a history and credit to get us the best Interest rates available in 2009?   Whats the best way to go in respect to getting financing? Finally can you take us through the process using your expertise regarding our situation? I really want to get this right because our future depends on my decisions. I will read all replies...Thank you

[DallasLoanGuy]

i am not the fico expert.... but i would say STOP opening credit card accounts.

do you have a paid off auto? maybe you can use it as collateral on an installment loan at a credit union.... pay it off over 12 months.

do those 2 things and you should be over 700 scores next year.

i would say that you need to come back here in 2009 with your scenario for financing advice. things are changing so fast right now that any advice there would be old in 2009

[Anonymous]

 We have a car we paid cash for that's worth about $3000. I'm sure we can get an installment loan for about $2000 from our local bank or a lending institution. I can deposit this money into my account and use it to pay off the loan thus basically paying the interest to establish an installment account, but is this necessary to qualify for a mortgage when I pay all of my revolving accounts on time and in full each month? Also, if I had the same history now as I predict I'll have a year from now would I get the best interest rates available and which programs would I qualify for?

[DallasLoanGuy]

the installment loan will improve your 'mixed use' of credit. garnering you some more points.

there are a couple of cats who post here that can advise you better than ,myself in this regard.... but a few extra points never helps.

your credit history seems pretty shallow. (short) so it is tough to say what you may get offered. if approved thru automated underwriting, then you get the best rates. if not, then we have to get a little more creative. if we CAN be more creative in 2009.

you would certainly wualify for fha if $300K is within loan limits in your area. conventional will be a toss up. short credit history is not a strength. but if you can sock away some savings or 401K then these compensating factors may put you in the best programs.

seriously.... there is no way to tell you what you will qualify for in 2009. but we will be here then.

consider the installment loan. maybe just borrow $1000 to keep interest costs down. maybe get a retail creit card too.... <= again, there will be a vouple of guys here that can tell you more about how spreading your credit around can benefit you..... not my expertise

[Anonymous]

Boy oh boy,

There is a FICO scoring perspective and a mortgage underwriter perspective on this.

If those are your only accounts here are the factors at play -

1) Very short history....under a year - this will not become a positive factor in a year

2) More regular CC accounts will not help....you are probably near maxing out on those tradelines

3) Your utility is very low overall but could be lowered down to under 5% on one account....maybe gaining you a few points (0-5).

This is all guess work but I see your 2 options as let your history grow for a bit over a year doing nothing but maintaining your current fiscal/FICO responsibility or 2 immediately go for 2 new accounts that will give you points in the mix category (but may hurt your score in the under a year timeframe).

Here are things you COULD consider:

1) A 1,000 loan that you would stretch out until you are ready to get a mortgage.....ie have like 200 bucks outstanding when you apply for a mortgage....this will allow you to get points for an installment loan but would likely not concern a loan officer.....if you take this option it will slightly lower your already very low average age and I would do this now...and not apply for a mortgage for 1 year.

2) Apply for a store card that you will use. Best Buy, Macy's, JCPenny's, Gap/Banna Repub/Old Navy, Victoria's Secret.

Those two types of accounts can add maybe 15-20 points to your score but they will ding your age and your new credit category. The new credit ding will go away in 1 year, so if you go this route I suggest not applying for a mortgage until just over a year past the date you open these accounts.

Your other option is to wait until about August 2009 doing nothing but ensuring no late payments and have only one balance report 1-5% util at the time you apply for a mortgage. We have seen people with 2 years history wind up with 720....that will get you near enough to the best mortgage rates if your income and DTI are in line. I defer to the mortgage people on that front.

[Anonymous]

I wouldn't recommend any more CC accounts. Four is enough to establish a good credit history. The exception to this is if you have several derogs. If you have several derogs, then your ratio of bad accounts to good accounts is still high, and adding another couple CC accounts and an installment loan might help.

How long is your TOTAL credit history (good OR bad)?

[Anonymous]

     My total credit history is about 11 months and all is good. I don't really want to open an installment loan because it's not needed because my wife has a car we paid cash for and my company provides me with a car. I will not open any more revolving accounts and will hope that my limits are increased with no problem with my utilization because we could pay cash for anything. We plan to pay out normal bills using the 4 cards and use our checking account to pay the cards off immediately.

     Using this formula I feel out limits and utilization will increase and our balances with be close to zero on all cards. Again in a year I hope to have the BofA card limit will be $2000, Orchard $1000, Cap One, $2500, and WaMu $7500 without any lates. My Fico score now is 671 and this with 2 cards with $300 limits and  no lates. I checked my score before BofA graduated me and increased my limit and  got approved for the WaMu and Cap one cards.

I'm hoping this is enough to raise my scores well above 700. With this added information wg=hat do you all think? Is this a good plan? Loan officers and moderators if we walked into your office can you help us get the best rates. Thank you and please give detailed information.

[Anonymous]

Rich,

I am not a mortgage expert but I expect your score - with 2 years of credit history recorded (and no new accounts in the next 13 months) to be 720+. You should go into the score simulator and try this scenario. You should also make sure only 1 of your cards reports a balance just before you apply for a loan and that this card reports between 1-5%. You don't need to worry about this if you keep your balances low until a month or two before you apply.

 I believe most private loans require a 760 for the absolute best rate, but your score should be exellent for FHA and the tier of rates just below the top. I think you should qualify for .1 or .2 % above lowest quoted rates. The difference in monthly payments should be pretty minimal.

[Anonymous]

   So if I don't acquire any more credit and keep things status quo I should be fine with getting a prime mortgage?

[Anonymous]

    I know my posts seem ongoing but please can anyone give us advice that could improve our situation. I've dreamed of giving my wife and hopefully soon my family a great start in life and your help is really appreciated. Your comments and congrats are heartfelt and warm and we thank you so much. I just want to make our journey as easy as possible with no problems when we start our search. Again thank you all but please more advice:-).