topic Re: Should I wait before getting pre-approved? in Mortgage Loans

Should I wait before getting pre-approved?

Anonymous — Sun, 11 May 2014 04:54:42 GMT

I'm looking to buy a house and wondering whether I should wait to get myself pre-approved or not - that is wait for my credit score to go a little higher

My credit score right now is 704. My salary is more than enough to cover the mortgage and I don't have a whole lot of monthly payments (few small student loans and a credit card). I can get my credit score to go up to 720 in the next two months (increase my credit line, pay more of my credit card off, etc).

Should I wait to get myself pre-aaproved or will the slight increase in credit score wont really affect my interest rate and mortgage terms?

Re: Should I wait before getting pre-approved?

Anonymous — Sun, 11 May 2014 13:00:07 GMT

Your Credit is good to buy a house and get more than decent interest rates my scores when i bought my house was TU 659 Exp 600 EQ 624 ... FHA only requires you to have a median score of 620 so i was 4 points over... I didn't have any credit cards at the time i waited until the day they handed me my keys to apply for cards and lines of credit. DO NOT INCREASE YOUR CREDIT LINE.. You will be adding more debt to your income and you want as less as possible. You will need a Pre- Approval from the mortgage lender. Don not pay anything off if you are not in default, behind or late. If they want you to pay it off let them tell you too.. They look at your credit report like there looking for germs.. and even with my 624 score, I got an FHA loan with 4% interest and my house appraised for 115k it was on the market for 103k and i purchased it at 98k !!(THE SELLERS WERE EAGER TO SELL)!! They paid for half closing , the appraisal, and survey.. I only had to put 3400 down to close my monthly payments are 907 a month and thats with my home insurance and Escrow account included... I had 10k stashed away in the bank... Which was more than enough.. We opened the contract on the house on 02/07/2014 and we closed on my house 30 days later on 03/07/2014.. I made sure all my ducks were in a row, bank statements, check stubs, W2's tax returns and all, they are gonna be all in your business, Underwriting took only 3 days !! So I knew I had no worries.. Now 2 months later my scores are TU 720 EX 688 EQ 640 I have a Walmart Card with a 500 limit and a 1k line of credit with my bank, along with an increase on my Conn's furniture account which was 2k now its 5300..

Your on the right path hun.. Just don't charge anything and dont apply for anything.. get your Pre-approval and start the process .. They will pull your report a total 2-3 times before the process is over..

1st when you start

2nd in the middle of the process, to make sure you havent added any new credit or paid off anything

3rd a few hours before signing just to make sure you havent made anychanges..

They will call your job to make sure you are still employed the day you close on your house... Trust me ...I Know..

and good luck to you and I hope this helps

Re: Should I wait before getting pre-approved?

StartingOver10 — Sun, 11 May 2014 13:42:10 GMT

There is a big difference in the cost for MI for a conventional loan if your score is above 720 so if you can get above 720 do so as it will save you money each and every payment

If you are going for an FHA mortgage, then you don't have to wait at all as PMI is not score related.

Where did you get your score? Is it a FICO score or from somewhere else. The lender will pull all three scores and use your mid score.

Increasing a credit line does not add to your debt. Adding to the balance add's to your debt. Normally we advise against getting any new credit within six months of a mortgage application.

What are your current limits and your balances? Reducing utilization is really the quickest way to increase your score. If you can do so, without impacting your down payment and closing funds, pay off your cc's except for one and bring it to 9% of the credit limit or less, you will see an increase in your scores.

Re: Should I wait before getting pre-approved?

CreditHealthy — Sun, 11 May 2014 14:39:45 GMT

Thanks was some very goo advice for us future purchasers.Thanks!

Re: Should I wait before getting pre-approved?

Anonymous — Sun, 11 May 2014 16:48:42 GMT

Thanks a bunch.

My credit line is at $8000 right now and I have $6300 on it. Also I'm going for FHA loan

That's exactly what I was asking...should I pay some of the credit card off (it will take me about two months) and increase my credit score before getting myself pre-approved? It sounds like I shouldn't be increasing my credit line so my credit score will probably not go too much higher than what it is now.

It will also mean that I'll be buying a house two month or so later (and interest rates might go up).

Re: Should I wait before getting pre-approved?

StartingOver10 — Sun, 11 May 2014 17:02:02 GMT

You can increase your credit line and it won't be an issue at all. Just don't apply for new lines of credit.

Pay down your balance to low as possible before applying. If you can do so, pay down at least $2k on your current card. It will help your score. If you know you are going FHA than you don't have to do it because you are in ok shape now to apply.

Re: Should I wait before getting pre-approved?

Anonymous — Mon, 12 May 2014 20:12:30 GMT

You guys mentioned that a CLI shouldn't matter if im pre-approving myself but is that the case even if there is a HP?

Re: Should I wait before getting pre-approved?

StartingOver10 — Mon, 12 May 2014 20:48:18 GMT

@Anonymous wrote:
You guys mentioned that a CLI shouldn't matter if im pre-approving myself but is that the case even if there is a HP?

Normally CLI's are soft pulls although some are HP. If you are going for a mortgage soon, don't app for any more lines of credit. Find out from the csr if it will be a hp or sp. Or check on the credit card forum here to see what they do for CLI's

Re: Should I wait before getting pre-approved?

dzemboc77 — Tue, 13 May 2014 18:45:31 GMT

I was in a similar boat, I wanted to get my utilization down to almsot 0 before I went in figuring the 20 point bump would be a big deal. I was going FHA and figured my med score with out it would be around 620-640. I wanted to start looking and buy a house so I said screw it and got my pre-approval. Med score of 639. Now since then I had to pay off a collection and that has already reported sicne last month My score has jumped 30 points. However the bank is not even going to repull cause it FHA and I guess they have worked with people in the mid 500's. Depends what option your going for. If you got the 20% down and closing costs saved up then maybe wait and try convectional. If your going FHA just do it now and you will be that much happier. My appriasal is tomorrow and closing is in 30 days. I probably could have done this 6 months ago but I was too afraid my score was going to hold me back.

Re: Should I wait before getting pre-approved?

StartingOver10 — Tue, 13 May 2014 23:19:12 GMT

@dzemboc77 wrote:
I was in a similar boat, I wanted to get my utilization down to almsot 0 before I went in figuring the 20 point bump would be a big deal. I was going FHA and figured my med score with out it would be around 620-640. I wanted to start looking and buy a house so I said screw it and got my pre-approval. Med score of 639. Now since then I had to pay off a collection and that has already reported sicne last month My score has jumped 30 points. However the bank is not even going to repull cause it FHA and I guess they have worked with people in the mid 500's. Depends what option your going for. If you got the 20% down and closing costs saved up then maybe wait and try convectional. If your going FHA just do it now and you will be that much happier. My appriasal is tomorrow and closing is in 30 days. I probably could have done this 6 months ago but I was too afraid my score was going to hold me back.

***Point of clarification dzemboc77, you don't have to put down 20% for a conventional mortgage. You can get one at 5% down. Also, a conventional loan allows a seller to contribute toward buyers closing costs and pre-paid expenses up to 3% of the purchase price.

There are other differences between conventional and FHA financing.

Re: Should I wait before getting pre-approved?

Anonymous — Wed, 14 May 2014 16:05:42 GMT

I keep hearing this but I'm not sure if I quite understand it. Does the credit score not matter as much if you are getting FHA?

(I'm getting FHA, Credit score: 701, and about 7% down payment)

Re: Should I wait before getting pre-approved?

guykara — Wed, 14 May 2014 16:10:21 GMT

With scores like that and that amount of a down payment, how come you're not going conventional?

Just curious, this is for my own research as well.

Re: Should I wait before getting pre-approved?

Anonymous — Wed, 14 May 2014 16:20:38 GMT

To be honest I havet made an intelligence decision on why go to FHA. I just assumed that since i'm a first time home buyer and I have less than 20% downpayment then FHA would give me better terms.

Is that not the case?

Re: Should I wait before getting pre-approved?

ShanetheMortgageMan — Wed, 14 May 2014 16:24:14 GMT

@Anonymous wrote:
To be honest I havet made an intelligence decision on why go to FHA. I just assumed that since i'm a first time home buyer and I have less than 20% downpayment then FHA would give me better terms.

Is that not the case?

FHA has lower interest rates, but higher mortgage than you would have if you took a conventional loan. Also FHA's mortgage insurance will last the life of the loan, whereas with 7% down and conventional financing you'd have it for 8 years max. Would do you good to ask your loan officer to compare both conventional & FHA financing for you.

Re: Should I wait before getting pre-approved?

Anonymous — Wed, 14 May 2014 16:31:02 GMT

I see. Thanks for the info. I didnt know that for FHA, the insurance lasts for the entire period of the loan.

I was thinking of getting a 7 Year /ARM because it would give me the lowest interest rate and more than likely I will be out of the house within the next 7 years. Does FHA still give me the option of doing 7 year / ARM or will I have to choose one or the other?

Re: Should I wait before getting pre-approved?

ShanetheMortgageMan — Wed, 14 May 2014 17:16:05 GMT

Haven't seen a 7/1 FHA ARM in awhile, plenty of 3/1 & 5/1 ARM's though.

The duration of the mortgage insurance depends on how much you are putting down and the term of the loan. http://ficoforums.myfico.com/t5/Mortgage-Loans/FHA-mortgage-insurance-changes-4-1-13-amp-6-3-13/td-p/1900029 has the details.

Re: Should I wait before getting pre-approved?

Anonymous — Wed, 14 May 2014 17:27:57 GMT

Thanks. Can someone get a 7 Year / ARM loan as FHA? or are those two separate loan types that I wuld have to choose one or the other?

Re: Should I wait before getting pre-approved?

ShanetheMortgageMan — Wed, 14 May 2014 20:13:49 GMT

As I said in my previous reply, I haven't seen a 7/1 FHA ARM in awhile. Many years. 7/1 ARM's exist, but I don't think any longer for FHA.