topic FHA Mortgage Questions in Mortgage Loans

FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 02:37:57 GMT

I am beginning the process of purchasing my first home. I will definitely be going with a FHA loan.

My mortgage lender pulled my CBR's today and my scores are: TU: 561, EQ: 569, EX: 609.

I have high credit card utilization on my cc's. He indicated that I need to pay down the cc's to 25% of the total credit limit for each trade line. He indicates by doing this, I will more than likely be at the 620 mark so my FHA application will be approved. As is, he would not give me a pre-qual letter nor did he submit as-is to FHA for decisioning.

Is what he is telling me true about paying down my cc's to aid in getting the FHA application approved? I have the cash to pay off all of my revolviong debt ($2,400) immediately. By doing this, will my scores improve rapidly? Can lenders supply you with a prequal letter with stips?

I appreciate any feedback.

Re: FHA Mortgage Questions

medicgrrl — Fri, 03 Apr 2009 03:07:33 GMT

I am by no means an expert on this but from what I have read on here, you want to have a very small balance remaining. Maybe not on every card but leave 1-9% balance on a couple of the cards so it shows that you use the credit and you pay it back as agreed. It is hard to say how high it will bring your scores up but it should definitely help. I think the higher your current utilization is the more points you will receive for bringing it down to 9% or less.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 03:15:16 GMT

Another non expert but here is my understanding. The industry standard minimum for FICO scores for a mortgage has become middle score 620. Getting a loan with scores lower than that is very difficult. Your middle score has not yet 620. By advising you to pay down your CC, he is trying to help you raise your scores so that when he sends your app through the system, you can be approved. In of itself, there are no FHA rules about what CC utilization you have to have to be approved. For instance, I am at about 30% uti but my credit scores are in the high 700's. They never even mentioned by cc uti because everything else was fine.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 03:25:12 GMT

Expert here.......or so I'd like to think ;-) To get the best rate with FHA it is 620 and up..

Credit card Utilization is the #1 killer of score.........This is the easiest way to raise your score high enough to get a 5% interest rate (when you need a 740 + in conventional)

Guaranteed that paying down your utilization will raise your score the fastest!

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 03:31:39 GMT

Thanks for all of the responses and help.

If I pay down all of my revoleving accounts very soon (let's say by the end of this week), is it possible that my scores will improve when I get the reports from myfico in May? Is there an average time for scores to increase once all revolving debt is pretty much paid off?

Re: FHA Mortgage Questions

medicgrrl — Fri, 03 Apr 2009 04:00:06 GMT

Creditors report once a month so it may take 30-45 days for your scores to increase. The sooner you pay them down the better. I have heard some on here say that the creditors tend to report just before the statement date. May want to look at your bills to figure out how soon you need to get those paid down

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 04:03:30 GMT

Actually mel, that's not quite right. You don't get the best rate with 620 up. It's one score just to get approved. You don't get better rates with a better score for FHA. (Unless that's changed in the last 30 days?)

You definitely need a minimum of 620, also it will help with your debt to income ratio if you pay them down. Once your score is ok, you may still not get approved for the amount you want simply because you have too much debt.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 04:08:53 GMT

@Anonymous wrote:
Thanks for all of the responses and help.

If I pay down all of my revoleving accounts very soon (let's say by the end of this week), is it possible that my scores will improve when I get the reports from myfico in May? Is there an average time for scores to increase once all revolving debt is pretty much paid off?

it would depend on when those payments are due. If you just got the bill and you pay those bills down now and send them before the due date then you will get credit pretty quick otherwise you would have to wait till the following month when your cc companies update the credit bureaus of your account status.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 04:10:35 GMT

Thank you Medccgrrl.

I don't think I have too much debt...after I pay down all revolving accounts to 25%, I will only have $981 in outstanding cc balances. My gross income is $75K/year. I don't think I will have DIR ratio issues. I understand you are not guaranteed a FHA approval once your fico score is at 620. Thanks for the information.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 04:31:18 GMT

Sorry, didn't mean to make it sound like you wouldn't get approved, i was just giving another advantage of paying down credit cards

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 04:35:24 GMT

I appreciate your input ladyofnight . Thanks.

Re: FHA Mortgage Questions

Anonymous — Fri, 03 Apr 2009 12:39:39 GMT

Many have found that the best thing with credit cards is to pay all to 0, but leave 1 with a balance of somewhere higher than 0 and less than 10% util.

Additionally, most cards report on their statement date. So if CC A's statement date is April 3rd, they'll report whatever the balance is on April 3rd, and if you PIF on April 15th, the CC won't report the balance until the next statement date of May 3rd, which means you may not see it reflected in your FICO scores until mid-late May. Depending on how fast the company reports that balance.