Getting a mortgage with bad credit/high income and vice versa

[Anonymous]

Hello everyone,

So I was wondering what would be the best way to get a mortgage. My wife has great credit (730 lowest of the 3) but really low income (10k a yr) as she's just about to finish up school and only works part time. I have bad credit (630 lowest of the 3) but a decent income (72k). So I was wondering how could we go about getting a mortgage loan? Would cosigning work? I don't know if it would as I've read that they take the lower of the two parties credit. So if that was the case it feels like it would be the same if I applied by myself. What would y'all recommend? 

Thanks!

[Anonymous]

Hello and welcome. First make sure that you get your your FICO mortgage scores not your FICO 8 scores. These are two different scoring models and yes mortgage lender will use the lower of both applicant's or single applicant's middle mortgage score of the three.

Next, you could apply alone and not take advantage of the additional 10k income from your wife or you could apply together using your mid mortgage score and possibly go FHA with 3.5% down payment.

At this point, this is all speculation. There are others who will chime in with more info but I would recommend speaking with a lender to get the best advise. From just the info you shared, I believe it is possible with both scenarios.....

[Anonymous]

If you want to be able to use your income, you will have to go on the loan. Are the scores you referenced your mortgage scores? If those are your FICO 08 scores, mortgage lenders do not look at those when qualifying someone. If you want to see your mortage scores, I suggest subscribing to a myFICO account to see. 

If you have any negatives on your credit, it would help to list them here so people can get an understanding of exactly what your challenges are. 

And yes, when there are two people applying for a mortgage, the lowest mid-score of the two is used. 

[Anonymous]

Thanks for that! And yeah those scores are the FICO for mortgages. I didn't know it was the mid score though, so I believe it's like 740ish for her and mine is 646 on the mid. Oh and yeah I have 1 negative on my credit. It was a collection back in 2014 for the amount of $440. It was a consigned apartment lease that my roommate ended up balling on and I ended up paying until I could and that was left and we were both sent to collections. I was going to try to pay for delete but I just recently found out that he ended up paying it off this January. So I can't do that anymore.

[Anonymous]

If he paid it off, is it now showing a $0 balance? 

Try calling the collection agency or writing a letter in a "goodwill" effort. When you write the letter, explain the situation and that you are now trying to get a home and you would like the debt to be removed from your credit report. If you write the letter, find as many addresses as you can for the creditor and you will need to send out the letters daily. The hope is that the letter will touch a different person and you may find someone who's willing the remove the account from your credit report. 

If that's your only collection, you will get a HUGE boost in scores. 

Do you have any credit cards? If so, post the limits and balances and people can tell you where to go from there. Also, if you have any installment loans (car loans, student loans), post that info too. Mortgage scores like credit cards and installment loans, but there's a way to pay them to boost your scores. 

[Anonymous]

Yes it is at $0 balance

i have a couple of credit cards

Amex gold charge card - not sure on limit

BoA Secure - $300

Discover - $2000

Capital one - $3000

Chase Freedom - $3000

Chase Sapphire - $5000

they're all relatively young. My BoA and Discover are my oldest at about 2 years and 10 months. I have low length of credit since I'm only 21 and got my credit card a bit after 18. My cards are all paid in full each month and I really only use 2. The others just catch dust. I only use them every now and then so they aren't closed.

I have one installment loan, a car for 20k. Which I pay $420 a month for and that's my only debts I pay on monthly. No student loans or other collections of any sort. 

[Anonymous]

Your scores are taking a hit by having all your credit cards report a $0 balance. The ultimate goal is to have all at $0 except one. The one card, and it can be any one you choose, should have a reporting balance of 9% or less of the limit. 

Are there any late payments on the car loan? If not, doing what I mentioned above with the credit cards will get you a boost, but it sounds like you're a good candidate for a mortgage. Depending on the price of the home, you may not need your spouse to apply, but if she did apply with you it definitely won't hurt your situation. 

Also, if she is graduating soon and has a job offer, there are some loan programs out that will use her offer letter as her income and count her school time as her employment. 

[Anonymous]

This is a lot of great info! 

So so I should keep one of my credit cards above $0 at all times? So above 0% but under 9%? 

I have 100% on my payments so I've never been late there. 

Oh and the home we're trying to get would be 225 or less and we live in Texas, I don't know if that extra info is helpful but I'm just putting it out there. But 225 is our max. We still have a bit before purchasing. We'll be buying around Feb or March of 2018 but we just wanted to prepare everything to be sure we'll be okay to purchase a house. 

[Anonymous]

Yes. Keep one card above $0 but under 9% of the limit. So if you take your Chase or CapOne card for example, you want that reporting no more than $270. 

Other than that, don't apply for any more cards. If your spouse has a credit card that is older than yours and has good payment history, get her to let you become an authorized user on that credit card. Her payment history and length of credit will transfer to your credit report and you can get a huge boost there too. Only do this if she has credit cards that are at least 4yrs old with perfect payment history. 

The only thing you have left is to let your accounts age, and you'll be good to go. 

[Anonymous]

Alright gotcha, so no more cards. She has only 1 credit card and it's 2 years and 2 months old. 

So we'll definitely be adding some more age to our credit history before we apply for this mortgage. Hopefully it all goes well!