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New mortgage and score questions

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New mortgage and score questions

Hi all, well my fico has been going about 1.5 years now. I had some prettt bad credit. I've worked hard and didn't buy any new cars of rack up debt. I went from about 600 to 765 in about 1 year. Which I'm happy to walk in just about anywhere and get a loan or credit.
One way I improved credit was a secured personal loan through PNC. Over time this bumped up my credit almost 40 points about 6 months in. After that I applied for Amex and was givin a large 10k limit. I pay off monthly. And that actually also increased credit.

Once the PNC loan was paid off I lost 40 points for paying off a loan?? Brought me down between 720-730. I wasn't happy but decided to take another loan out from PNC small 2500 this time "not secured" I'm only 3-4 months in and no bounce back yet. I'm hoping at the 6mo mark it goes back up 40 points. I am taking a couple hits from the hard inquiries.

I recently went in for mortgage. Was offered 3.5% using FHA. On 200K loan. I qualified for it on my own, No fiancé on it. But now I'm worried about the drop I might see when we close. To put her on loan they wanted another $70 a month due to lower credit score.

My Fico score simulator shows it only going to drop about 15 points with a 200k loan, which I don't believe. I hear scores dropping almost 100 points or better.

Point is I held off from new truck I really need. Not want. Lol. Im driving a 1992 and hard getting inspected. Do you guys think I should move quick after closing and add the auto loan? Or maybe I won't take the credit hit I'm thinking? I also thought about fiancé or prob wife by closing in December to apply for my truck loan. And co sign it.
What do you all think? I fought very hard to get my credit in check, and as many of you know the feeling when your credit not so good. I want to avoid that road again. My fiancé didn't have bad credit but she had no credit. I started working on hers 6mo ago and went from 0 fico score. Lol. To a 640 or so.
By adding her to some of my cards and a secured credit card from Pnc as well.

I'm willing to listen to any advice givin.
Message 1 of 5
4 REPLIES 4
Moderator Emerita

Re: New mortgage and score questions

Welcome to MyFICO! Smiley Happy

 

You have done very well getting your score up over the past year. Congrats!

 

A couple of comments:

 

It is normal for a score drop when you pay off an installment loan. It doesn't seem logical, but that is what happens when you have no open installment loans reporting. You took care of it by getting another small PNC loan. You should see results (more points) when your installment loan is paid down to less than 10% of the original amount borrowed (in your case, when you have less than $250 remaining on the $2500 loan). There is some speculation here  on the Understanding FICO scoring section that you may see a score bump if you pay your installment loan to less than 70% of its original loan amount, but we don't know that for sure.

 

Having said the above, your scores are just fine for an FHA loan. In fact, you could easily qualify for a conventional mortgage (score wise).  The advantage to a conventional mortgage loan is that the MI will drop off automatically when your loan balance reaches 78% of the original appraised value - saving you that monthly MI fee. For FHA the MI is there for the life of the loan - unless you put down more than 10% of the purchase price, then it will drop off after 11 years. Have your LO give you the comparison between an FHA loan and a conventional mortgage loan so you have the info to make a decision that is in your best interest. 

 

As to getting married - please wait until your loan closes. If you marry during this mortgage approval process, then you will need to change the contract and the title work will need to change a bit. 

 

As you saw with the figures, if you add your fiancee to the mortgage, then her scores are used: lowest mid-score of the applicants is the qualifying score. That has a tendancy to increase your interest rate on a conventional loan. It doesn't affect the interest rate on a FHA loan normally unless the score is very low (under 620).  Is your mortgage broker just a broker or does he also originate, underwrite and fund the loan (mortgage banker).  Big difference. 

 

As to the truck purchase:  hold off until after closing.  Any truck payment will affect your DTI which may or may not affect the purchase of your home. We don't have figures so we have no idea of what your front end and back end ratios are to know if it would hurt your home loan. 

 

 

Message 2 of 5
Established Contributor

Re: New mortgage and score questions


@StartingOver10 wrote:

Welcome to MyFICO! Smiley Happy

 

You have done very well getting your score up over the past year. Congrats!

 

A couple of comments:

 

It is normal for a score drop when you pay off an installment loan. It doesn't seem logical, but that is what happens when you have no open installment loans reporting. You took care of it by getting another small PNC loan. You should see results (more points) when your installment loan is paid down to less than 10% of the original amount borrowed (in your case, when you have less than $250 remaining on the $2500 loan). There is some speculation here  on the Understanding FICO scoring section that you may see a score bump if you pay your installment loan to less than 70% of its original loan amount, but we don't know that for sure.

 

Having said the above, your scores are just fine for an FHA loan. In fact, you could easily qualify for a conventional mortgage (score wise).  The advantage to a conventional mortgage loan is that the MI will drop off automatically when your loan balance reaches 78% of the original appraised value - saving you that monthly MI fee. For FHA the MI is there for the life of the loan - unless you put down more than 10% of the purchase price, then it will drop off after 11 years. Have your LO give you the comparison between an FHA loan and a conventional mortgage loan so you have the info to make a decision that is in your best interest. 

 

As to getting married - please wait until your loan closes. If you marry during this mortgage approval process, then you will need to change the contract and the title work will need to change a bit. 

 

As you saw with the figures, if you add your fiancee to the mortgage, then her scores are used: lowest mid-score of the applicants is the qualifying score. That has a tendancy to increase your interest rate on a conventional loan. It doesn't affect the interest rate on a FHA loan normally unless the score is very low (under 620).  Is your mortgage broker just a broker or does he also originate, underwrite and fund the loan (mortgage banker).  Big difference. 

 

As to the truck purchase:  hold off until after closing.  Any truck payment will affect your DTI which may or may not affect the purchase of your home. We don't have figures so we have no idea of what your front end and back end ratios are to know if it would hurt your home loan. 

 

 


Good advice.

Goal: 700's by 11/1/2015 (all baddies will be gone)
Message 3 of 5
New Member

Re: New mortgage and score questions

Thanks very much for the advice. Good advice indeed!!

Her mid score was a 631 and they still wanted to add that 1/2% interest. I wanted to do conventional but bought a small house from savings when we moved here 2 years ago. I didn't want to rent and had bad credit. Not enough time saving to go many other routes than the FHA. Until I heard about the 5% conventional.
The lender/ broker do originate loans, and they came pretty well recommended. I hear they only loan about 25-35% of there loans. The rest are sent through other lenders. I'm glad they originated mine and I know there close and have a few branches around.

As for the truck, I was going to wait, but be ready to pull the trigger on a new one like rite after closing, the ink might not be dry yet,lol. that way I get a better interest rate just in case it takes a hard hit. Even if the fiancé goes main and I co sign. But that will prob not help the interest. But I never want bad credit again, I think I start taking out loans at once some flags will wave.

My debt to income is going to be a bit high now. Since I took out a over 200k loan. Once we're married can that DTI be shared? Say my mortgage is $1500 will they calculate her as owing 1/2 and relieve my debt to income? Or combine our incomes to make it smoother?

I don't understand banks. Ok she has little credit history, but makes good money, I don't understand why they charge more to have 2 people responsible for payment on a loan. The way it stands I run into trouble. I dunno, I'm just saying if I was bank, the more the merrier to hold responsible.
Message 4 of 5
Moderator Emerita

Re: New mortgage and score questions


@Jeffrey919 wrote:
Thanks very much for the advice. Good advice indeed!!

Her mid score was a 631 and they still wanted to add that 1/2% interest. I wanted to do conventional but bought a small house from savings when we moved here 2 years ago. I didn't want to rent and had bad credit. Not enough time saving to go many other routes than the FHA. Until I heard about the 5% conventional.
The lender/ broker do originate loans, and they came pretty well recommended. I hear they only loan about 25-35% of there loans. The rest are sent through other lenders. I'm glad they originated mine and I know there close and have a few branches around.

As for the truck, I was going to wait, but be ready to pull the trigger on a new one like rite after closing, the ink might not be dry yet,lol. that way I get a better interest rate just in case it takes a hard hit. Even if the fiancé goes main and I co sign. But that will prob not help the interest. But I never want bad credit again, I think I start taking out loans at once some flags will wave.

My debt to income is going to be a bit high now. Since I took out a over 200k loan. Once we're married can that DTI be shared? Say my mortgage is $1500 will they calculate her as owing 1/2 and relieve my debt to income? Or combine our incomes to make it smoother?

I don't understand banks. Ok she has little credit history, but makes good money, I don't understand why they charge more to have 2 people responsible for payment on a loan. The way it stands I run into trouble. I dunno, I'm just saying if I was bank, the more the merrier to hold responsible.

^^^This is lender specific. Some mortgage lenders have a min mid-score requirement of 620 and others of 640 or even 660. 

FHA loans are not score sensitive so I don't understand why he added 1/2 point to your rate. In your shoes, I would start shopping other mortgage lenders. Stay away from big box banks - they are super conservative and right now don't do a good job with FHA loans. Go to a mortgage banker that originates, underwrites and funds their own loans.  

Message 5 of 5
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