@Anonymous wrote:
A friends father is a home builder in our area. We've been offered a great deal on a new home. Here is the catch:
We're what we considered years away from owning a new home. 5 years ago we had premature twins weighing in at a pound each. Up until that point my husband had 12 years of perfect credit, never late, not once. Had balances that were managed well, ect. Mine was average as I had gone through a divorce. I was 51% of our salary and had to quit working to go on bedrest in the 2nd trimester of my pregnancy. The twins were born and you can see the DRASTIC change in our credit reports... lates started coming..... we somewhat recovered and vowed to never get in any debt, even managable debt again.
A couple years after that one of our children was diagnosed with Autism.... oddly enough, there went the credit reports again! We literally were paying out the equivelent of TWO mortgage payments per month in therapy for our son. A year later our oldest child fought (and survived) esophageal cancer.
Here we are, a few years later with one, what I call large, debt of $5000 (paying $275 per month on) and two car payments totalling $900 per month that will be paid in 2-3 years. We've paid off any and all credit cards and closed the accounts.
My husbands scores range from 545-596. His income last year was $7100 gross per month and this year so far as been about $8600 per month. I think we have a decent DTI ratio.
We can easily be *gifted* 20%-30% of a down payment on a home in the $250k-$300k range.
Is there any bank/mortgage company that will consider us? We have strong ability to pay, decent debt to income ratio, will have excellent collateral on the home (instant equity of about $75-80k), however, a negative credit report.
Will our circumstances be listened to? We proved ourselves as worthy prior to a few major events in our life. We anticipated waiting a little while longer, but the opportunity we've been given doesn't come along very often and after the curve ball we've been thrown with our children we're chomping at the bit over this *break*!
Thoughts?
First of all, I am so sorry you've gone through so much with your babies! For whatever it's worth (not trying to proselytize) I'll be praying for you and your babies!
Now, down to advice.
First thing is that your DH's scores, if all of the lates occurred a few years ago, might be caused by the lack of revolving credit (credit cards mainly). In order to judge what a good credit-risk you are, FICO needs to *see* you *use* credit. FICO especially likes to see a "mix" of credit. Meaning, installment loans (like your car notes) and revolving credit (again, like credit cards).
Is there any way you can try to reopen those closed credit cards? If they're really old, probably not - but it'd be worth a try. If you can't reopen them, you'll need to open new ones. With your DH's scores, I'd try Household Bank/Orchard and/or Capital One. If your scores are better than his, you can open a line or two and put him on the account as an Authorized User. That, too, would boost his scores.
The only problem with that tactic would be that opening the new accounts could either penalize him a few extra points (FICO doesn't like people getting new credit as a rule), but he'd quickly recoup those points and then some when the accounts age in roughly 3-6 months. Most likely, though, he'd see a few points boost from having that mix of credit.
As to the instant equity in the home, unless it's a refinance, I don't think (99.9% sure) that's how it works. The real (or fair market value) of the house will be based on what you actually pay for it. So if the house appraises out at $300K, but you only pay $250K for it, $250K is the FMV of the house. So, there is no equity in the home, at the end of the day.
Our home appraised out at $230K (though it would have appraised at $350K before the "crisis" ) and our home's value is just that $230K. Since we did put down $20K, we have roughly $20K in equity. However, once you've *bought* the house, if the value goes up, that *will* be your equity. Until you've bought it, though, its not equity per se -- certainly not equity that you use in your favor in the buying process. :/
Basically, until the house is actually yours, it's not your equity -- it's the bank's or builder's equity. Unless it's a refinance (in which case, you're the owner, so it's your equity).
Not sure if that made sense.
For your hubby's credit, you'll either need to open a few good accounts (credit cards) or see about getting past negatives OFF. To that end, I'd run over to the Rebuilding Your Credit forum and start posting baddies (the uglies on your DH's reports). There, you'll get great advice on asking for Goodwill adjustments (basically, ways to ask the creditors reporting to have a heart and remove some of the ugly stuff) or PFDs for the accounts that aren't paid already.
Either way, I wish you the best of luck!!
