HELP!!! Can I get my score up in 30 days??!!!!

[Anonymous]

According to my lender, my score is 559. It's this bad because of all the 30, 60 and in some cases 120 days late and a couple of collections from my divorce in 2004. I was not planning on buying a home for another couple of years because I knew my score needed improvement and I didn't have a comfortable amount of money to put down or towards closing costs. A deal of a lifetime recently fell into my lap though: Brand new construction, 3% towards downpayment, closing costs paid and 2% back (because we know the Pres. of the Builder). My lender has given me a list of things to do and is confident that he can get me approved before I would need to go to settlement (end of August) to get into the place, then refinance in 3 months if necessary.

Here's what I have to do: Pay my credit cards to below 50% of the limits, then dispute balances (I've done this for 2 of the 3 already); pay off an old collection account that I thought was my ex-husband's all these years and dispute that it's been paid; pay 2 medical bills that have gone into collections, then dispute that they are paid; dispute any accounts that have been purged from the creditor's records, and dispute an account that was closed in May 07, but shows a 30 day late in July. Potentially, how much could this "repairing" bring up my score?

I have a contract on this place (in good faith), but don't worry, I will not be financially obligated if it falls through. Here's the kicker though: In the midst of all this repairing, I missed a car payment. Just completely overlooked it and didn't realize it until I went to pay this month's. I paid it immediately and called the first business day to speak with someone to make sure they acknowledged it and begged that it not be sent to the bureaus… too late. Am I doomed? My lenders a bit worried now too, but thinks we may be able to get around it with an explanation letter.

This could be my first home; do I have a fighting chance to get my score up above 580 (min. to get qualified). I know I won't have the best interest rate, but I will keep working on my credit and refinance in 3 months. I do not want to lose this place. I need this place for my family. Please advise. Thank you for your help.

[marty56]

Paying down your util is the fastest way to boost your score.  9% or bellow is the best.  Even if you did that today, it make take 60 days to show up on your CR.

IMHO 30 days is a short window to make a change on your CR regardless of what you do.

[Lel]

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@Anonymous wrote:
I know I won't have the best interest rate, but I will keep working on my credit and refinance in 3 months.

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Whatever you do, I don't think you should assume that you will be able to refinance in 3 months. I say this for several reasons. First, if your home's value decreases in value over the next few months (which is a very real possibility), then probably won't be able to refinance the entire balance of your loan. Second, it appears that the guidelines for refinancing are different from those for newly-originated mortgages. 3% equity (or less) may not get you a new loan, and you'd be stuck with an unfavorable interest rate.

Other things to consider are the closing costs associated with a new loan. I don't think you're going to be able to get your closing costs paid on the second time around, and the closing costs can be substantial. Also, even though your FICO score might rise in the interim, it's unlikely to rise to the point that you're going to get a substantially better interest rate. Interest rate, furthermore, are experiencing upwards pressure, so in 3 months you might not even get a better interest rate, even if your score goes up by 50 points.

Be careful. And try not to make this home the be-all, end-all home of your dreams. When my wife and I were home shopping, we let at least 3 or 4 "perfect" homes pass because we weren't quite in a position to buy. The home that we're in now is still perfect for us.

[marty56]

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Lel wrote:
Be careful. And try not to make this home the be-all, end-all home of your dreams. When my wife and I were home shopping, we let at least 3 or 4 "perfect" homes pass because we weren't quite in a position to buy. The home that we're in now is still perfect for us.

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Good point.  There will always be dream homes.  Best to wait till your position is better.

[Anonymous]

Thank you for your insight. I am not relying on refinancing as I know it may not be the best thing to do right away just for sake of doing it, but I like the idea that it could be an option. I don't foresee the property's value decreasing either. This is the first residential building to be constructed in a development planned to consist of these condos, single family homes, retail shops, hotel, a park and office buildings. You are right about the closing costs though.

You know when you are searching for that perfect person to spend your life with but everyone you date has potential but just doesn't work out? After you frustrate yourself enough, your friends give you the advice to stop looking because once you stop looking is when that perfect person will find you. I've looked at many homes with seriousness, just casually passing by, just for fun and some were wishful thinking, and a few times thought I found the one, but this one is the only one that found me and everything about it just feels right – the neighborhood, the unit, the people, the price. I have never felt like this about any of the other homes I looked at. The coincidences surrounding this community and tying it into our current neighborhood are just too weird as well. I know it shouldn't be this hard to get approved, but I am truly beginning to believe that this is a test of my determination and will. I know I probably sound crazy, but this home just feels right.  

[Anonymous]

What about rapid rescoring? Don't some lenders have that ability? 

[Lel]

Well, good luck on your endeavor. It's good that your decision to buy this home is not predicated on the ability to refinance. You should look at the terms of the initial mortgage and determine whether you could afford the payments indefinitely.

Just a couple last things I would point out: if your home will really be the among the first in a large complex, then it would stand to reason that in the future there will be other similar homes in the same area. Thus, if you felt the need to wait in order to get your scores up, then some new construction will come on the market, and then you might be in a better position to purchase. Of course, that would run the risk of interest rates being generally higher.

The other thing is that with new construction going on around you, it make make your home less attractive on the resale market, because buyers would be able to opt for brand new construction. I don't have any personal experience with this, but my sister bought one of the first homes in her development about 10 years ago. When they sold last year, their home value, adjusted for inflation, was the same or lower than their purchase price.

[Anonymous]

Thank you Lel for your thoughts.  They are much appreciated. I have thought about and decided that if this particular unit does fall through then I will shoot for purchasing one in the next couple of buildings to go up, but I've already seen the pricing. The same floorplan I am looking to buy has already increased by at least $15K in the next building. Also, like you said the interest rates could be higher later too; although I'm more than likely looking at a pretty high one right now anyway.

As far as resale, I have no intentions on selling because I plan to keep it as an investment property for later on down the road. The residential construction going on around us is all the same condo community (and same 2 floorplans) unless someone wanted to purchase a single family home. Even then, the pricing for a single family home would be way out of reach for anyone that would be shopping for a condo in this neighborhood. If I did end up wanting or needing to sale, because I bought mine during preconstruction pricing, I could ask for much less than my competitors and still make a hefty profit. I do have experience in real estate sales (just not so much the lending aspect of it), because was a real estate agent. I also sold new construction and this community I have my eye on now has the potential to be a goldmine. What I'd like to do is use this condo to help buy one of the single family homes projected for construction in about 2-3 years.

Thanks again for your thoughts and also the good luck... I need it.