topic Re: Updated*The Journey to build our house" Thread in Mortgage Loans

Construction completed! Well, pretty much....

Anonymous — Mon, 17 Jun 2013 14:42:45 GMT

My wife and I received a letter from our preferred lender pre-approving a new construction loan (FHA) with the purchase price as well as the property taxes and proposed interest rate. We can't actually complete an loan application because my wife is not yet two years from her bankruptcy discharge ( one of the conditions listed was that they can't actually take the loan app until mid March).

The lender has reviewed all of our W-2's, my wife's bankruptcy filing, tax returns, pay stubs and credit reports, so the pre approval is based on our actual verified income and so forth.

However, one of the conditions is as follows: FICO Score must be 640 or above for both borrowers. For me, that's not an issue, my scores are in the 700's. For my wife though, her mid-score at the moment is 630. It was 639 about two months ago, but dropped after we leased a new car. Dumb idea, i know, but we honestly didn't think we were going to try and build a house until next year and the purpose was to give her a new trade line and get the score up. But, we decided to try to buy a home now so here we are.

At the moment, beyond her bankruptcy, the big issues with her credit are a high revolving debt utilization, as well as the fact that the new loan is on there and it's overlapping for the moment with the old car loan it replaced. That loan is PIF, and we have a PIF letter. Also, obviously, we have two relatively recent inquiries - the car a couple months ago, and the mortgage lender about 5 days ago.

Now, with time, she will recover the points lost after the new loan was reported. As for the credit card debt, we are going to be paying a signifcant portion of it off within the next month. I assume the credit inquiries will be a little less detrimental with the passage of time as well.

My question is, do lenders necessarily need you to hit that 640 score at the time you apply or would the condition on our letter be suggesting that she needs the 640 before we can close on the loan? Because that would mean we would have until July basically to get her score up.

If i can provide any more information, i can certainly try. Thank you in advance for your feedback!

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 16:46:32 GMT

I am not sure as they already preapproved you for a purchase price, but you just can't do the loan app until the BK is discharged two years. I thought you couldn't even be preapproved without meeting the requirements. The Broker that ran my credit in July told me my credit and debt were excellent but I had to wait until my BK was discharged 2 years to move forward. I didn't receive a preapproval letter nor were any documents taken from me to start a file. So I think you may be dealing with a unique situation with this lender, so I would ask your lender directly when he needs your wife's score at 640. The lower UTIL should be enough to raise your wife's score above 640.

Congrats on preapproval! :-)

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 17:09:15 GMT

Your Lo or Broker can issue pre approval.They let you know what has to be done before can submit it.

Must likely they will have to pull your reports again once your waiting period for BK is over. Also since your wife score presently doesnt qualify for Lender requirements.

If that is the Lender you are choosing to do business with, then your wife score must meet there minimum requirement before application is processed.

You didnt mention how high your UTIL is, but if you bring it down you will gain points. Depending on how much you lower your UTIL will depend how much score will increase.

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 17:26:36 GMT

Well, between now and then, the plan is to pay down the revolving debt from about 84% to 50%. In that timeframe, that's about as aggressive as we can get without accessing funds we have set aside for a down payment, closing costs, reserves, appliances and whatever else may be necessary.

Now, you said that until my wife's score meets the requirement, the application will not be processed. Does that mean they will deny the application or does that mean the file will just sit until the score is gets to 640?

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 18:49:50 GMT

I think your conditional preapproval will just sit until the condition is satisfied...similar to how conditional approval works. It will expire after some point though and your LO will know how long your conditional preapproval is good for.

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 19:37:57 GMT

I know all lenders and builders do things differently, but here is what we were told and what we are currently going through:

We are in the process of building new (just went this weekend and they are halfway done framing, yay!), we submitted the contract with a 30 day financing contingency at the beginning of November. They gave us an additional 14 days because my husband's score was 4 points shy of the required 680 (for conventional), so we paid down some cards and waited for the new balances to post. We hit a few snags and came super close to losing the contract, because our builder will not start on your home until you have a real loan approval, first through the desktop system, then through the underwriter. If we had failed to bring the score to where it needed to be they would have released our lot to someone else (we snagged the last one, so I know there was plenty of interest).

Now we have approval, but since credit scores are only good for x days we will have to pull credit again before we close this Spring. So I make myself sick on a daily basis, logging into each and every account we have to make sure nothing is awry. Never realized building new and waiting it out could be SO stressful.

Anyway, hopefully your builder will work with you some. But I think you would be out of luck if they require a real approval before starting the build...

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 19:56:53 GMT

I'm sure our situation will probably involve something similar to that. I believe we should be in pretty good shape to squeak through with a 640 or so score for her by the time the application rolls around by paying enough debt off as well as having a car loan that has a zero balance actually reflect that zero balance. Aging the new car lease will help as well, usually you take a hit in your score and then it goes up within a few months so i'm expecting a rebound there. It's ten points. If we're sitting there at the beginning of March with a mid 630's score i'm sure there's something we can do to boost it just a few more points so that they can start building. We are lucky in that there are a bunch of lots available where we are. In addition, there's another development they are just starting in another area where we live, so if we happened to miss this window and all the lots were gone, we would probably just retry around this time next year but we'd rather not wait if we don't have to.

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 21:20:54 GMT

A 30% utilization rate is ideal for revolving credit, so if you could take some of the money you have set aside for appliance purchases and pay your credit cards down to the 30% mark you'd see improved scores and could then later then use the cards for the appliance purchases.

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 21:30:10 GMT

Any predictions on how the overlapping car loans getting cleared up will effect the score? As I said earlier, there's a loan showing a balance of around $1000, but it's actually paid in full. The two auto loans are overlapping. Also, we have no collections or charge offs or anything of that sort, but there is a late payment on there from October 2010. My wife insists she made payments over the phone on time every month, i'm just wondering if that late payment is even impacting the score at this point?

Re: Questions about pre approval condition

Anonymous — Mon, 28 Jan 2013 23:14:36 GMT

In my experience late payments have always fallen off after 12 months. If you're still seeing something on there it might merit a closer look.

As far as the overlapping car loans go, I would contact the lender as to why it's they haven't reported the loan as paid in full to the credit bureaus yet.

Re: Questions about pre approval condition

Anonymous — Wed, 30 Jan 2013 15:27:25 GMT

Eh, most installment loans list at least a 24 month rolling history of payments so i'm not surprised it's still showing up, but i think the impact of that is negligible. We will look at her score next month and see if we need a few more points after paying debt off. If so, she will try to get it removed with a letter to VW. I was warned that when you have loans taken out within 6 months of trying for a mortgage, those car loans can overlap because it may take a month or two before they list the old loan as PIF. I don't think it will have much impact on her score as it's an installment loan, but we don't have far to go. Anything helps.

Re: Questions about pre approval condition

Anonymous — Thu, 31 Jan 2013 05:05:52 GMT

When I leased a car in Nov, the payoff amount wasn't reflected on my credit reports until a month after leasing the new vehicle and trading in the old one. I applied for mortgage preapproval 2 weeks after that.

Re: Questions about pre approval condition

DallasLoanGuy — Thu, 31 Jan 2013 06:56:50 GMT

i preapprove people in your situation all of the time.

you can be preapproved subject to score. especially if the loan officer runs a score simulation and knows what your score will be after reducing utilization.

if your loan officer is good... then you will be fine

Re: Questions about pre approval condition

Anonymous — Thu, 31 Jan 2013 16:56:31 GMT

I should point out that my wife didn't emerge from a bankruptcy and then go and run up tons of credit card debt again. Most of the debt is mine from before we were married...she was added as an authorized user on some of my accounts, but not all of them. While it brought her score up very quickly, the utilization is still high. We are going to attempt to get it down under 33%.

Re: Questions about pre approval condition

Anonymous — Thu, 31 Jan 2013 17:02:07 GMT

Shoot for less than 30%.

Re: Questions about pre approval condition

Anonymous — Fri, 01 Feb 2013 15:09:26 GMT

Apparently, we would need both our mid scores to be 640 to close on the loan after the house is built. I spoke with someone involved yesterday, and he said they have a credit repair program they can put you through and get you where you need to be anyway. Not that they do it for everybody, but if your score is that close and the income is there, there are no lates or chargeoffs or any other issues...then it's an easy file for them to approve. So, apparently, we are good. Still paying the debt down though.

Re: Questions about pre approval condition

Anonymous — Fri, 01 Feb 2013 15:26:57 GMT

That's great news! It looks like you will be able to move forward with building your house!! Exciting!!! :-D

Re: Questions about pre approval condition

Anonymous — Mon, 04 Feb 2013 16:55:11 GMT

We are hoping February sails by pretty quickly. We can apply "officially' in March, and assuming we don't screw up between then and now as they've already seen our credit reports, income, ect, they can start digging the hole. lol.

Re: Questions about pre approval condition

Anonymous — Mon, 04 Feb 2013 17:40:51 GMT

Woo hoo! I know you have gained a lot of knowledge from this forum to pass with flying colors come March. I think waiting will be the hardest part but I will be reading your story a long the way. I look forward to hearing more about the new house! :-)

Re: Questions about pre approval condition

Anonymous — Thu, 14 Feb 2013 17:01:17 GMT

February seems to be crawling along. Anyway, we have paid down debt, but the statements won't update until the end of next week so not much to report as far as credit score changes, though my wife's low score at the time of the lender pull on 12/20 has gone up 15 points even without the debt pay down. I can only assume adding the car loan helped her as there weren't any other changes other than regular monthly payments being made. At the time, her transunion score from the lender was her high, experian at 639 was her mid, and the equifax score (which matches the score here on myfico) was her low.

The transunion score the lender pulled was 21 points higher than her transunion score from here, and her transunion score here went down 8 points. Again, i'm assuming the car loan in November just impacted that particular scoring model differently. We are assuming either equifax or experian are going to be her mid-scores...we will see. I'm confident we can get her scores where they need to be with 4 or 5 months to work with.

We were able to add a morning room to our contract...now, that happened after our pre-approval, and adds a sizeable amount to our loan (though not if you think of it in terms of being spread out over 30 years), but still fell within DTI limits for FHA.

We can't officially "apply" until Mid march, but my wife just got a new job in the same industry she was in, essentially going from an assistant manager to manager...and received a nice $15,000 raise to go along with it. So our DTI will look even better.

Other than that, not much to update. Just hoping the days pass a little faster! lol