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Obtaining Mortgage & Negative Items

bekl26
New Member

Obtaining Mortgage & Negative Items

I am ready to begin the mortgage process and have started monitoring my credit more.  My 3 scores are EQ 647, TU 666, and EX 693.  I have two cards that at the time the scores were generated were at 92% uti, I paid them down to 60% uti, and may bring down to 30% within the next few days.  Those cards (obtained in 2003 and 2004) are my only active credit cards besides a student loan.  I have never been late on any of these, my student loan has been paid on for over 4 years and never late either.  However, in 2001 I had a charge off of $1000 which I settled for $800 and it was paid on 9/2003.  I also got very behind on a credit card due to unemployment in 2002.  The card shows closed at my request and payments got back on time in 1/2003.  I have paid on it since and never late again.  Those are my only two negatives.  I have other accounts that were paid satisfactorily.  I have ten months worth of mortgage payments saved up in my savings account and my husband has excellent credit with no blemishes and only around 30% uti.  My questions are 1) Do you think a mortgage lender would make me pay off the balance on the card I am still paying on and 2) Do you think obtaining a mortgage now is a realistic for me?  With both of our incomes combined I know we can qualify (granted my issues don't stand in the way) for the price range I am thinking about, however with just my husband's income we could afford it but not sure if he would qualify alone.  I would hate to use that savings to pay it off, I like the cash reserve for emergencies.  Thanks for your time or any advice!
Message 1 of 9
8 REPLIES 8
TheNewWorldMan
Valued Contributor

Re: Obtaining Mortgage & Negative Items

What kind of balance are we talking about?

If your balance is in the hundreds or low thousands, they're probably not going to be as concerned as if you have an $12,932 balance.

From what I understand, you can get a mortgage with those FICOs, though your interest rate will be high. The major baddies on your CR have aged enough that you have a second chance now.

The housing market is not going to be booming again anytime soon. My bottom-line advice to you is to wait a year. Get your financial situation in better order. Pay down that balance, whatever it is. Give the baddies another year to age. Let your FICO come up another 30 to 40 points.
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in a credit-scoring postnuclear Stone Age...
Message 2 of 9
Noah_Bodie
Senior Contributor

Re: Obtaining Mortgage & Negative Items

There are some mortgage products that use all 6 scores (your 3 and your husbands 3). With a middle score of 666 for yours, and your husband's being better, I don't foresee you having trouble getting a mortgage. Work with a mortgage broker rather than a bank. The broker will have access to way more mortgage products.

 

What's your window for a home purchase? Next month? Summertime? Fall? etc.

 

Total CC util under 50% is good, but under 30-35% is about what mortgage companies really wanna see.

 

For the old charge off, you could try contacting the OC and inquiring about whether they would consider a PFD. If the DOFD is from 2001, then it won't drop until sometime in 2008 or 2009. However, since it's that old, I would first try to get a GW delete. Those are free.

Message 3 of 9
bekl26
New Member

Re: Obtaining Mortgage & Negative Items

Thank you for your replies.  The actual balance I owe is 7,300 unfortunately but that is paid down quite a bit from what it was a while ago.  I spoke to a mortgage broker (not a bank) about price range with our income two weeks ago just to get an idea but did not allow them to run our credit yet or go into a lot of detail.  I was hoping to look soon, I have been renting at the same place for almost five years now and am ready to pay my own mortgage instead of someone else's.   It may take me a while to find the right house, I may end up waiting though.  I am new to this board and alot of the credit terms so I apologize, what does GW stand for?  Also, I have heard about pay for delete but not sure how it works.  The collection agency shows on none of my credit reports, only the original creditor.  Thanks again!


Message Edited by bekl26 on 04-26-2007 02:17 PM
Message 4 of 9
boheme
New Contributor

Re: Obtaining Mortgage & Negative Items

Lenders are interested in the your credit card but not quite how you might think. There are primarily 2 concerns with regards to lenders and your credit cards:
  1.  Your FICO score affects your rate. Having credit cards with higher uti. will lower your score and hence negatively impact your mortgage rates and options.
  2. DTI - Debt to Income ratio. This number will limit the amount that you are able to borrow and this is where credit card balances come into play. The ratio max will depend on the lender and the type of loan, but the max is usually not more than 50%. I have seen higher, but usually there are compensating factors. The number says that 50% of your gross income can go towards your monthly debt.

DTI =  Monthly Debt   (Credit card monthlt minimum payments, Mortgage payment, etc.)No utilities!      Monthly Gross Income

As long as your DTI is in line, 9 times out of 10, the amount you owe on the card won't matter to the lender. The lender shouldn't require you to use your reserves to pay them down and if they do, there are other lenders out there that will not.

 

Message 5 of 9
bekl26
New Member

Re: Obtaining Mortgage & Negative Items

Thank you, that helps.  What we were planning on spending monthly on a home along with our debt puts us at about 38% of our gross monthly income so that should keep us in line.  I have even been estimating a mortgage payment on the high side in case my scores cause a much higher rate. 
Message 6 of 9
TheNewWorldMan
Valued Contributor

Re: Obtaining Mortgage & Negative Items

That's decent, but still a little high. I;m a hardnosed conservative when it comes to taking on debt. A mortgage within your means is one thing, but to me walking around with high CC balances and loans is like putting a big red flag on my rear end and hanging it out the window. High debt is just an invitation for Old Man Murphy (you know, of Murphy's Law fame) to take his Pellet Gun of Ill Fortune and start taking potshots at your derriere.
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in a credit-scoring postnuclear Stone Age...
Message 7 of 9
Noah_Bodie
Senior Contributor
bekl26
New Member

Re: Obtaining Mortgage & Negative Items

Thank you all for your opinions and suggestions, I do appreciate them.  I paid 2 of my credit cards down to 60% uti, and within one week my EXP score went up 9 points and TU went up 7.  That is encouraging!  At the beginning of this week they were at 70% uti and it looks like that was what was reported.  Keep in mind, I did have them at 90%.  I wish I had found this forum ages ago!  Instead I was not proactive and ignored my scores.  Lesson learned. 
Message 9 of 9
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