Extremely Discouraged and in Need of Advice

[Anonymous]

Hi all,

I always value the incredible advice given here, so I am hoping you all could provide me with some advice or insight...

We have been pre-qualified for a mortgage of around $230K. (Not pre-approved, just pre-qualified). Our lender has our full credit reports, his stated income, and my tax returns since I am self-employed. 

The issue is that apparently, my husband's mortgage score is much lower than we thought vs the numbers we can see. When we first spoke to our bank we stated his mid score was around 629, and the rep. came back with an obviously off-the-cuff estimated interest rate of 4.75%. While I wasn't thrilled about it, it is what it is.

That's when things went downhill. I spoke to the loan officer today, and she informed me that after looking at our file, as it stands right now our rate would actually be 5.25% and our PMI will be a whopping $230 per month! Clearly, his score is a lot lower on their end than we anticipated. And here's the real kicker, on this loan with 5% down, we're looking at a mortgage payment of around $1,750!! I almost fell out of my chair when she told me that. Before you ask, no, we cannot currently pay more than 5% down, unfortunately. 

The upside is that she said PMI is not based on credit alone, it's also based on our DTI which we are about to improve by getting rid of one CC that has a mo. min. of $185 (0 interest). The balance is down to $580 or so, so we plan to pay that one off STAT to increase our "buying power" in terms of DTI. We have not started the application process yet because we need some more info. from our builder (we are doing a land/home 2 close, it's our only option for what we're doing right now).

Is there anything we can do to increase his mortgage score quickly? What are your experiences with PMI costs and why is this so darn high, or do you have any tips or tricks we can do to get that number down? She did say she was basing the total mo. payment on the high side of homeowner's ins. and prop. taxes, which I expect to be a bit lower, but not by too much. I am trying not to get discouraged yet since nothing is really in stone, but that PMI amount has me really shaken up. We plan to put a laser focus on his credit as much as we can and try to chip away at some things in the interim. I just know that it can take a month or longer for a lot of things to "report" so I don't even know how much it will help...

Thanks, everyone. 

I ran numbers diligently for weeks and ended up with a typical mo. payment of closer to $1450 or so, so this additional $300 is making my stomach turn. 

[JVille]

In this website you can pay to pull a one time 3 Bureau report for each of you. You need to do that now. Get a report for each of you and use the drop down box to look at your FICO Mortgage Scores. These are completely different than the Free scores you get from your Credit cards or credit karma. You need to see your scores and go thru that report line by line to see what is holding your husbands scores down.
Maxed out credit cards, slow pays, collections and charge offs are likely culprits.

[pgtackle2003]

+1 to what @JVille stated. Knowledge is the key things here especially for mortgages. Then there won't be any surprises for what you thought your scores should be. They offer a family plan here where you can get both your scores for one price. Anyhow paying the CC balance down will certainly help both scores (assuming your both on the CC). Mortgage scores are especially sensitive to debt, so getting this down should boost a few points. Also as @JVille mentioned you need to examine what else is keeping the scores down, perhaps there are things on the CR you don't know about it. I know how discouraging it can be to get numbers like that, that just aren't affordable. Get your CR reports and examine them, if there are no major derogatories most of it can likely be fixed in pretty short order. Get thos reports and let us know

[Anonymous]

Thank you both! I will get those tonight and take a closer look...

We ran all 3 reports (the free annual) last month and we did see his derogs there. He called the collection co. for the Verizon debt today and paid it, and the rep. told him it should boost him by around 25 points in about a month. Not sure I believe that, but hey, worth a shot.

Another question: He also has a medical col. for around $400. Our LO said they "don't count medical, but it can't hurt to pay it down or pay it off." Even though they "don't count it," I assume he'd still be better off paying that one, too? I am trying to remain positive, since we do have a bit of time on our side...

[pgtackle2003]

That small of a medical collection won't affect your mortgage app or rates. But I do agree it is likely a good thing to resolve at some point in time, allthough I'd wait until after closing. I highly doubt paying one collection will boost 25 points (they really shouldn't be telling people that as everyone CR report is different) but it certainly won't hurt. Are there other collections besides the medical and verizon he paid?

[Anonymous]

No, those two are it... I also have a Verizon col. I need to pay (kind of funny, we both have them, both around $100 each). She said us paying those were conditions they already set, which is totally fine. I think what may be hurting him also is his utilization.. he has a fairly high util. rate.

I think him paying off that $580 balance at $185 a month will definitely help us, too...