topic Re: Prepping for Mortgage - Any Advice Appreciated in Mortgage Loans

Prepping for Mortgage - Any Advice Appreciated

BakedLays — Tue, 18 Feb 2020 09:33:13 GMT

Hello All-

I am hoping to apply for a mortgage sometime in July or August (probably July). Here's my current situation:

MORTGAGE SCORES (5, 4, 2): 731, 735, 750

FICO 8s: 724 (EQ), 717 (TU), 723 (EX)

FICO AUTO Scores range 715 to 766 and FICO9s range from 735 to 754.

All scores above pulled Feb 10.

I've never made any effort to optimize my credit, and have, over the years, been a bit lax at times, and had high utlization. Scores have been a bit of a roller coaster.

I currently have only three open CCs:

Discover (20K CL); balance at time scores above were pulled was $7543, now $6049

BoA CR (14K CL); balance at time scores above were pulled was $804, now $799

CapOne (2.8K CL); balance at time scores above were pulled was $5, now $0)

I have two 30-day lates. One on the CapOne from June, 2013 (I assume this rolls off next June?), and one on the Discover from March, 2016. BOTH are very frustrating, as I had auto-pay set up, and for reasons neither CCC could explain to me, it didn't process, and there was not an issue with funds. I have not written GW letters to either; the CapOne will be off soon enough, and from what I've read, Discover won't remove it. No other derogatories in my files.

I haven't had an installment loan since 2010 (CapOne Auto), was paid as agreed. This was by choice; I tend to buy used cars that I can afford to pay cash; I know, not the best way to maximize credit scores.

I have a few other TLs reporting, all CCs closed by grantor (non-use, I think), including a couple where I was listed as AU (though I don't think that's accurate--they were my wife's cards; none have derogatories.

No Inquiries, no applications for credit, AAoA reported ranges from 18.5 to 19.5 years; oldest acount 21+ years.

My plan--subject to change with advice from the smart peeps here:

--Pay BoA to $0

--Maintain CapOne at $0

--Pay down Discover to less than 8.9% Util (~$1600).

I would like to raise all scores above 740....and dream of 760, but don't think that's in the cards by this summer. The FICO8 Simulator doesn't even get all three above 740 after paying off all (or mostly all) CC balances. My mortgage scores are a little higher, so hoping that's doable, though seems the magic number has crept up to 760 for many lenders.

Some questions:

1. Does it matter the order I pay down/pay off those balances? Was considering paying in amounts that crossed various total and individual card Util thresholds (28.9%; 8.9%) in part to measure impact on score.

2. I am going to be stretching for the DP and closing costs. I can get to 10% for sure (thanks to an expected $12k tax refund). But I don't think I can get to 20% unless (a) some property I have a small ownership interest in sells, AND (b) I take about 10k out of a Rollover IRA (early distribution; I can't take a loan on this, I don't think). With that in mind...am I better off limiting my pay-down on the Discover to get just below the 8.9% Util threshold, or should I try to pay it down to (near) zero?

3. I do not currently have a mortgage, and haven't for many, many years, for various reasons (mostly poor fin mgmt). Should I consider FHA (mostly for DP reasons; I am worried that I won't have enough reserves after DP/3x PITI)?

4. If so...that brings my wife's situation into the picture. She currently has two store cards with probably $1200 balance between them (over 50% Util each) and a Discover with $9500 balance (I think CL is $16k). Might have a another store card, not sure. I have not run a full 3B on her yet. She had a couple other closed accounts that we just paid off (prob not reflected on current score). Her Discover-reported FICO is 704. Have no clue, yet, about what her report says; probably similar to mine; she pays the bills (well, did; I've taken mine over now). So...we can work on paying those balances down...but obviously all of that works against $ available for DP.

5. Other factors: I'm a tenured professor and make about $130k (20% of that is summer, and not gauranteed, but I've never had a summer where I did not get to teach a full load). I've been at my current University more than 10 years, and was at my previous school more than 10 years. My wife is a Elem School Teacher's Aide, and makes $12k per year. My original plan was to apply by myself; but concerns about DP/reserve cash, as well as thinking my wife's CS might not be as bad as I feared it might be, and going FHA might make sense? (which i realize would necessarily bring her into the picture). Thoughts?

7. I did take a loan in Dec on my work-sponsored 457B plan ($27k, payments ~$620/mo) to pay off/down CCs (yes, util was real high). Do I report this as a loan? (I assume so, but read one post suggesting it is not considered a loan for these purposes?) Payment is auto-drafted from our joint checking (only acct we have) each month, so it will be visible to underwriters when they pour over our checking acct statements.

8. My target purchase price is $300k, give or take 10%. I'm not young, so was leaning 20-yr or 15-yr. I realize at 10% DP that might start to get tight. That said, my current rent is probably as much, or more, than what my MP would be.

9. If applying by myself makes most sense, should my wife open a separate checking account from which her CC payments are made? Wondering if that is something we should do now?

I'm sure I'm leaving stuff out...but that's already tl;dr for many, I suspect. This whole process is pretty intimidating to me (sad to say), so TIA for any advice and help!

Re: Prepping for Mortgage - Any Advice Appreciated

AllZero — Tue, 18 Feb 2020 11:58:36 GMT

Early Exclusion:

7 year (plus 180 days) mark is the DoFD exclusion date. You can request for EE Early Exclusion on your derogatory / delinquency from:

TransUnion - 6 months early.

Experian - 3 months early.

Equifax - 1 month early. I would not recommend requesting EE. Let derogatory / delinquency fall off naturally.

Call up TransUnion . Front line csr may be able to assist. If not, request to speak with a supervisor to have the Capital One 30 day late removed. You won't be able to remove the Discover delinquency until 2023. You may not see a score improvement until the last late is removed. However, since EE request is a simple process might as well take advantage of it.

Re: Prepping for Mortgage - Any Advice Appreciated

AllZero — Tue, 18 Feb 2020 11:11:35 GMT

CLI Credit Limit Increase:

When was the last time you have received any CLI on your credit cards? It will lower your utilization % if approved. I would recommend checking to see if you are eligible for it.

BoA should be a SP Soft Pull TU inquiry. See if they will do 2x current credit limit.

Discover, SP inquiry.

Capital One, SP inquiry.

Re: Prepping for Mortgage - Any Advice Appreciated

AllZero — Tue, 18 Feb 2020 11:51:49 GMT

Optimizing credit report. Pay down/pay off those balances:

You have a good plan. 2,4,5 scores like AZEO All Zero Except One and will react positively.

BoA - Pay to zero. Keep reported utilization at $0

Capital One - Pay to zero. Keep reported utilization at $0

Discover - Pay to 28.9% or under utilization. ($5,780)

Currently you are at about ~23% reported utilization. Once you cross 8.9% aggregate utilization you will see a score improvement.

I think 740 is achievable. 760 if you remove all the lates. Since down payment is a concern. Concentrate on bringing your Discover to 28.9% first. If you need more points, there may be a 4% aggregate threshold.

EX has a 4% aggregate utilization threshold (0,4]

Re: Prepping for Mortgage - Any Advice Appreciated

AllZero — Tue, 18 Feb 2020 11:47:33 GMT

Free mortgage scores

Re: Prepping for Mortgage - Any Advice Appreciated

Revelate — Tue, 18 Feb 2020 15:43:41 GMT

Don't count yourself out of the 760 club, that is not a bad file at all. Your aggregate history dwarfs mine too, only difference is I have more open accounts (which you absolutely unequivocally should not open any new ones regardless of what you get to, you will get whacked in your scorecard for that).

I would be very interested to see what score you do get to when you are fully pretty, I have a 60D late from 2018 on TU and got north of 770 TU FICO 4: that is a different scorecard than a 30D late but I wouldn't give up hope yet as you have non-trivial revolving utilization and could well be more than 20 points from my own experience lately even with one revolver reporting over 30%.

I wouldn't make plans regarding mortgage type yet: there are very good rates even at 5% down on conventional and even at your current scores a LO would probably steer you towards that. PMI is pretty stupidly cheap right now. I don't know if I would do a 10 or 15 year: it's not that big of a savings on rate and it doubles or more your payment and that isn't a good financial place to be in if things get tight. Better would be to get the 30 year and just double or triple up on payments if needed which gives you some cushion if you need to spend money elsewhere: make the minimum single payment and go on for that period.

Wife being in frame or not, another game day decision but if it were me and I didn't have a enough cash to do everything easily and quickly I would consider not prettying hers up and leaving her off the mortgage strategically. If you have excess cash then it's just good financial management to pay off her CC's anyway and get back into the grace period but mortgage probably trumps that.

I can't answer the lending specific questions as those are pretty detailed but if you have gotten bonuses for 2+ years those will be counted.

You should be in a pretty good place after following the advice upthread for file optimization.

Re: Prepping for Mortgage - Any Advice Appreciated

BakedLays — Wed, 19 Feb 2020 01:01:34 GMT

Thank you all for the advice!

Revelate, I think you made a key point that mirrors my current thinking--that it might make most sense to go solo, save cash for DP and closing costs, and have a steady plan (which we already do, anyway) for paying my wife's CCs down to zero, as we go, rather than turbocharge that now.

Given that, anyone know if it makes sense to move all of those transactions to a separate (new) bank account in my wife's names, rather than make those payments from our joint account?

Also, any advice for which path to go for a mortgage/LO for someone in my situation (not a clear slam-dunk) would be appreciated. Based on some stories from friends, I get the impression that people with profiles somewhat similar to mine have struggled with many of the local banks. Would it make more sense to go with a Mortgage Broker who can shop a bit more? Am I even making any sense here, or just showing my ignorance?

Thanks, again, for any advice, and for that already offered.

Also, I spoke with a friend today who has multiple mortgages through Wells Fargo...he said they asked for detailed explanations for all deposts over $500...when I said, "but that was just for the last few months, right?" he said, no, they asked for a lot more bank statements than that....couldn't remember how far back they asked for, but "less than 5 years." I was a bit stunned, as I assumed it was pretty unusual to ask for more than a 2-4 months. Does this sound right?

Re: Prepping for Mortgage - Any Advice Appreciated

Revelate — Wed, 19 Feb 2020 02:25:15 GMT

It doesn't sound like your friend's experience is normal, and it's likely because he is claiming those properties as investment income and that's where the two years comes in when you're trying to get additional financing most likely.

In your case it'll be a few months. I wouldn't try to hide anything, my inflows and outflows have been all over the map drunken fiesta style in the past few months but if your income is direct deposited all the CC payments will be seen. Also credit card payments are all obvious in the payment record. Frankly it's when you try to hide something is when the underwriter gets supicious... be as up front and transparent as possible, and in addition try to look as normal as possible. Normal people don't have anything to hide in this case.

What's awkward is if you have large deposits that can't be shown to be yours: one of the critical things is you cannot be borrowing (certain gifts not withstanding) to finance the mortgage, the money has to be yours and seasoned for a certain period. Chase only asked me for a total of 3 statements when I went through my first mortgage, I gave BOFA 2 statements to start and they asked for a third which showed my earnest money deposit. When 2 large paint by numbers mortgage originators are so close in their practices I don't think there will be much problem.

Then again for neither of my two mortgages have I been a marginal borrower so there might not have been any need for the UW to ask for more but I don't think you're a complicated mortgage to underwrite from the sounds of it.

I have not used a mortgage broker personally though that is a personal choice. Ultimately there's enough information available on the net that it's less useful in terms of knowing where good rates and who good companies are. If you know any real estate people actually ask them, they know generally who not only has decent rates but also doesn't miss on closing day. Get a list of 3ish and then ask for a quote from all of them... since the mortgage inquiries all count as 1 (scoreable that is, they will list separately but rolled up in a 14 day window) as far as credit scoring goes, it's really in your interest to check with 3 or even more if you want as you don't actually pay a fee until you're going to do the deed.

In my case I tried with Chase first, then did a sanity check with one of the well known online lenders from Zillow and a RE friend of mine highly recommended them and they were far better, but the builders preferred lender in my case had a godlike credit being offered which they said I qualified for so I'm off spending time with them trying to answer the obligatory underwriting questions.

Generally speaking you don't want a big bank unless you are going for a jumbo mortgage (or unless said builders preferred lender happens to work for BOFA, anyway...) and you want an outfit that deals just with mortgage origination. They live and die by that and clearly to Chase it's just another revenue stream even with my alleged status with that bank, and I hear more horror stories about big banks missing than pretty much all of the smaller ones combined.

Re: Prepping for Mortgage - Any Advice Appreciated

BakedLays — Wed, 19 Feb 2020 02:43:46 GMT

Thanks, again.

Just for the record, the reason I asked about bank statements wasn't a desire to hiding anything, really--certainly not my own finances. Rather, our joing checking (our only account) co-mingles our finances, obviously, and we pay not just mine, but her CC payments through that account--my thought was: is this a underwriting "back-door" for considering spousal finances against an app, even when they aren't a co-borrower? Again, if that's the right way to do things, so be it. But if the strategy is to go solo, I just wondered if things would be cleanest if she was paying her debts (which in the next two months, will only be the Discover balance) out of her own account? It's not like they are overwhelming, but as you say, they are non-trivial.

Re: Prepping for Mortgage - Any Advice Appreciated

Revelate — Wed, 19 Feb 2020 02:47:00 GMT

@BakedLays wrote:
Thanks, again.

Just for the record, the reason I asked about bank statements wasn't a desire to hiding anything, really--certainly not my own finances. Rather, our joing checking (our only account) co-mingles our finances, obviously, and we pay not just mine, but her CC payments through that account--my thought was: is this a underwriting "back-door" for considering spousal finances against an app, even when they aren't a co-borrower? Again, if that's the right way to do things, so be it. But if the strategy is to go solo, I just wondered if things would be cleanest if she was paying her debts (which in the next two months, will only be the Discover balance) out of her own account? It's not like they are overwhelming, but as you say, they are non-trivial.

Nah, don't change a thing. The bank statements aren't really to prove cash flow per se, they're to demonstrate that money is yours and not someone else's. Also they serve as asset declarations too vis a vis 401k statements.

There may be a quick sanity check but ultimately paystubs and W2/tax returns will be the income line. Discretionary spending can always be reduced is the thinking.

Re: Prepping for Mortgage - Any Advice Appreciated

BakedLays — Wed, 19 Feb 2020 06:55:46 GMT

Thanks, AllZero...the EE is not something I was aware of. I'll take your advice and request it from TU and EX, and let if fall off naturally on EQ.

As to CLI, I've never requested one, on any card, ever. However, Discover just bumped me $2k last month, and BoA bumped me probably not all that long ago, as well (I think; heck, TBH, I never paid that much attention--might have been more than 6 months ago). My CapOne CL has not been increased more than once, maybe (if that), since it was issued, probably because (a) I've too often had heavy util on my other cards, and (b) I simply haven't used it much (maybe a handful of times), so I haven't exactly been a profitable customer for them. Would you recommend requesting a CLI on that card, now? Or, should I use (and pay-off) the balance for a couple months, first (i.e., be a more viable customer)?

Thank you for sharing your insights!

Re: Prepping for Mortgage - Any Advice Appreciated

AllZero — Wed, 19 Feb 2020 07:06:55 GMT

@BakedLays wrote:
Thanks, AllZero...the EE is not something I was aware of. I'll take your advice and request it from TU and EX, and let if fall off naturally on EQ.

As to CLI, I've never requested one, on any card, ever. However, Discover just bumped me $2k last month, and BoA bumped me probably not all that long ago, as well (I think; heck, TBH, I never paid that much attention--might have been more than 6 months ago). My CapOne CL has not been increased more than once, maybe (if that), since it was issued, probably because (a) I've too often had heavy util on my other cards, and (b) I simply haven't used it much (maybe a handful of times), so I haven't exactly been a profitable customer for them. Would you recommend requesting a CLI on that card, now? Or, should I use (and pay-off) the balance for a couple months, first (i.e., be a more viable customer)?

Thank you for sharing your insights!

@BakedLays Good luck on the EE request.

BoA requires a 91 day interval from last approval on CLI.

Discover - I'm not quite sure on the CLI interval. One could try every month?

Capital one requires a 6 month interval from last approval. However, Capital One seems to want a lot of usage. If usage is low, expect not to receive any CLI. They are a little bit tight on the CLI request. The growth can be a little bit slow compared to your current cards. It all depends on the cash back / rewards you're willing to trade on diminishing returns.

Re: Prepping for Mortgage - Any Advice Appreciated

BakedLays — Wed, 19 Feb 2020 07:58:29 GMT

@Relevate I just read your March/April Closing thread post....and it triggered something.

One thing I noticed in my 3B pull I ordered from MF is that my employer is still listed as my previous University (from 13 years ago). I assume this is because I have not applied for new credit since working there (I don't think)? I assume this could be one more minor snag in UW, so is this something I can request the CBs change?

Re: Prepping for Mortgage - Any Advice Appreciated

Anonymous — Wed, 19 Feb 2020 10:25:36 GMT

I was just asked by our underwriter about a CC payment on our joint account that is my wife's card. So yes they may ask but they have you write an LOE stating who the card belongs too.

Re: Prepping for Mortgage - Any Advice Appreciated

Revelate — Wed, 19 Feb 2020 11:32:45 GMT

Actually employment from a credit report is flatly ignored to my knowledge: honestly it is almost always a self-reported field meaning you update it on the bureaus.

Occassionally a lender might report it but it is seriously rare. My own Experian report has me listed as working at Entex Information Services... which in my case was 1996-1997. Things have changed just a bit since then .

More concretely they will ask for W2's, paystubs, and the explicit dates of all jobs worked in the past two years and they will contact said employer too to verify.

As a result don't sweat it.