Cleanup For Mortgage App

[Phnx_26]

Seeking advice on the best way to clean up before mortgage application in 6 months (1st time buyer). Current FICO 8: EF- 670, TU - 632, EX - 657. Middle 5,4,2 is currently 602.

Multiple lates (30,60,90,120) 🙈 but 18 months ago. By the time I apply these will be over 2 years old - will that still have an impact? I'm reading most qualifications look for lates in the past year.

2 open collections - is it realistic to expect them to be removed once paid?

Utilization at 47% - working on dropping that to 10% before applying.

DP will be somewhere between 5-8% and will have extra for closing.

[JoanFinancial]

Mortgages care about mortgage latest. Other late payments just impact your score which will impact the program i.e. conventional or fha.

After 2 years late payments impact on score is reduce so might see scores go up a bit. Mortgages dont care about balances of loans or credit cards either only obligated payments when calculating dti. 

Lowering utilization is the easiest and quickest way to increase credit score. Lender's have different thresholds for credit scores and pricing but where I work your score is good for fha right now but ideally you want over 620 to get the more leniant thresholds for fha. 

Personally I dont recommend conventional unless you are over 700 and the way the market is I would advocate buying a home as soon as possible.

[TXPocohontas]

How old are the collections?  

[Anonymous]

technically you cannot pay collections off for deletion. It is apparently "against the law" to pay for deletions. Check your credit report see if there are any  inaccuracies that you could maybe prompt for a dispute?

if you pay collections that doesn't mean it will automatically be deleted. 

[Phnx_26]

18 months

[Phnx_26]

@JoanFinancial  thank you, that was very helpful info! I am trying to get to a 620 before applying, but definitely within the next 6 months - as soon as I can without fully depleting funds for DP + closing

[JoanFinancial]

Getting 620 on fha will increase your approval amount, but thats if you need it. Mortgages are regulated heavily so you can't be put into a bad spot but that doesn't make the max threshold for buying ideal. Under 620 keeps dti more in line with conventional thresholds and a bunch of other rules. 

In general government loans don't like active disputes on the report. Most of the time they can be ignored but it can delay the process if you need the bureaus to remove it. I would not worry too much. The majority of people qualify its more about how much you want to qualify for. You can always pay down debt but it can be much harder to get paid more. 

I assume you are in Phoenix from your name. Its pretty competitive in the market but I still get people everyday that have the seller help pay costs. Fha is great for this if you are doing minimum down. There are lots of ways you can get it to work regardless of score. Some lenders have teams who can help get credit up with no cost for the service if you need it to qualify.

[pizzadude]

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@Anonymous wrote:

technically you cannot pay collections off for deletion. It is apparently "against the law" to pay for deletions. Check your credit report see if there are any  inaccuracies that you could maybe prompt for a dispute?

if you pay collections that doesn't mean it will automatically be deleted. 

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While some CAs will never do PFDs, there are many examples of those who will.   Just do a search on the CA name in Rebuilding forum for specifics.

There is no law requiring creditors or CAs to report to CRAs, it's completely optional on their part.

[Phnx_26]

@JoanFinancial thank you! I'm actually in NJ. I've tried different calculators and it seems like the amount will be ok, I am a moderate to high earner. I know the calculators aren't accurate but hopefully it's in the ballpark. Pre-qualification will tell when it's time...but yes, definitely want to get to 620, just hope I can do it in enough time.

[JoanFinancial]

Calculators are weird and you need too look at what they have set for loans because its usually for the best profile possible. You can find taxes of an address on county assessor, get a quote for homeowners insurance and use an amortization table. You can know exact payments with minimal effort. 

If you are worried about time it looks like you are qualified and if dti is not an issue I'd go shopping.