seeking conventional mortgage w/ 120 day cc late

[Anonymous]

Hi, my wife and I are seeking a conventional mortgage loan. My wife's EQ FICO is 703, TU FICO is 696. However, she has a 120 day late on a now-closed credit card 4 years ago that appears on both reports. We have not had luck w/ GW letters (it's BoA).... I really wish we could b/c I imagine her score would skyrocket. This is the only blemish on her credit report. Will this affect our ability to obtain a conventional mortgage? I am hoping not since it is 4 years old.  We are putting 5% down, and my scores are in the same range with no blemishes (well... there were some 5+ years ago but I have gotten them removed successfully!).

Thanks!

[Lel]

As time goes by, late payments tend to have less of an impact on one's credit score, so the removal of that late may not have a dramatic impact on your wife's score.

Since she has had an otherwise perfect payment history for the last 4 years, and assuming that her reports demonstrate recent responsible use of credit (i.e. she didn't go off the credit grid for the past 4 years), then that late payment, even though it's a 120, shouldn't sink your chances for approval, provided that the rest of your application package is good (income, other debts, etc).

But I'm not certain that you're going to be able to get a conventional loan with just 5% down.  You may need to consider an FHA loan.

[Anonymous]

thanks, and yes, everything else is good. documented income will allow for less than 36% debt to income ratio for all debts plus mortgage/PMI/taxes/insurance. You worry me though about not being able to get a conventional with 5% down... the mortgage amount will be too high for FHA. I'm OK with it being tough to find, but if it is closer to impossible then we are going to have to rething things.

[Anonymous]

Hopefully one of the mortgage pros will chime in, but I think generally comnventional is needing closer to 720/740 midscore to do 95% loan.  I could be worng on that though.  It is the mortgage insurance that is the tough part.  The banks are willing to lend at 680 for sure, but the PMI is tough.  And if it is in one of the hard hit areas, they may want as much as 20% down to do a loan with those scores (10% may be possible)