Renting For Way Too Long - Ready To Own

[BrownSugah66]

Pleasant greetings to all of you amazing contributors. I appreciate the knowledge and advice shared through these forums. I am hoping someone could help to put my mind at ease about preparing for a mortgage loan. I am admittedly clueless about what type of mortgage loan is best for me and how to even get started with the mortgage process. I’ve been renting a house for over 11 years and am, quite frankly, tired of paying for someone else’s mortgage. What are my chances of getting approved for a $300k mortgage loan with a decent interest rate? Purchasing my first home as a divorcee (8 years) 1st home-buying experience in 2005 (married) Renting a house for over 11 years (excellent rental history) GOAL - Mortgage Closing by February 2020 MORTGAGE LOAN TARGET- $325K DOWN PAYMENT - 20K GROSS INCOME - $92K CURRENT FICO SCORES - 68% total utilization reporting, No Collections/Charge-Offs, 3-30-day late pay in Oct. 2016, Newest Credit Card in May 2019: TransUnion FICO 8 = 680 / FICO 5 = 639 Equifax FICO 8 = 662 / FICO 5 = 632 Experian FICO 8 = 666 FICO 2 = 636 INSTALLMENT LOAN (Auto) = $20k balance REVOLVER CREDIT LIMIT / BALANCE Amazon Store Card $3500 / $2900 AMEX #1 $1000 / $375 AMEX #2 $1000 / $475 AMEX #3 $1000 / $450 AMEX #4 $1000 / $600 BarclayCard $4000 / $3300 BCU Visa $7000 / $6700 CAP1 Platinum Mastercard $3500 / $2300 Chase Southwest Priority Rewards Visa $4000 / $3100 Chase MK Visa $1500 / $1000 Walmart Store Card $3500 / $3000 Ashley Stewart Store Card $1850 / $0 Lexus Pursuits Card $1500 / $0 Target RedCard $300 / $0 PayPal MasterCard $700 / $0 $0 Ulta Store Card $400 / $0 Victoria’s Secret Store Card $500 / $0 Thank you in advance for your advice / suggestions. 😊

[CreditInspired]

Hi there,

I had to copy and paste your DPs into a more readable format, which is listed below:

MORTGAGE LOAN TARGET- $325K

DOWN PAYMENT - 20K

GROSS INCOME – $92K

No Collections/Charge-Offs,

3-30-day late pay in Oct. 2016,

68% total utilization reporting

Newest Credit Card in May 2019:

CURRENT FICO SCORES - TransUnion FICO 8 = 680 / FICO 5 = 639 Equifax FICO 8 = 662 / FICO 5 = 632 Experian FICO 8 = 666 FICO 2 = 636

INSTALLMENT LOAN (Auto) = $20k balance

REVOLVER CREDIT LIMIT / BALANCE

Amazon Store Card $3500 / $2900

AMEX #1 $1000 / $375

AMEX #2 $1000 / $475

AMEX #3 $1000 / $450

AMEX #4 $1000 / $600

BarclayCard $4000 / $3300

BCU Visa $7000 / $6700

CAP1 Platinum Mastercard $3500 / $2300

Chase Southwest Priority Rewards Visa $4000 / $3100

Chase MK Visa $1500 / $1000

Walmart Store Card $3500 / $3000

WooHoo -- zero balances (keep this way)

Ashley Stewart Store Card $1850 / $0

Lexus Pursuits Card $1500 / $0

Target RedCard $300 / $0

PayPal MasterCard $700 / $0

Ulta Store Card $400 / $0

Victoria’s Secret Store Card $500 / $0

So, to prepare your credit profile in preparation for a home:

1. 68% UT is way too high. Work toward getting this to <8.9%
2. There are way too many cards with balances. Work toward getting almost all of them to $0 except one.
3. Do not apply for anymore anything. Lenders don't want to see new accounts 12 months prior to applying for a mortgage. You may want to consider waiting until May 2020. At least this would give you time to get those cards with balances paid off or paid down substantially.
4. You need your FICO mortgage scores, which may be lower than your FICO score. Your middle FICO mortgage score is the one that counts.
5. What is the payment on your auto and how many more payments are due?

Hope this helps.

[BrownSugah66]

OMG CreditInspired...THANK YOU so much for you advice!! I appreciate it so much. I was really hoping to close on a house once my lease is up on January 1st...but I definitely understand the need to lower my overall credit utilization significantly. May 2020 has a nice ring to it I have 3 years left to pay on my aut loan at $565/month. Do you think focusing on paying the $20k auto loan balance down first is a good idea? Or...should I pay down/off the smaller balances first for a greater impact to my mortgage fico score??? Again....I appreciate you taking the time to reply to my obvious outreach for clarity of direction.

[CreditInspired]

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@BrownSugah66 wrote:
OMG CreditInspired...THANK YOU so much for you advice!! I appreciate it so much. I was really hoping to close on a house once my lease is up on January 1st...but I definitely understand the need to lower my overall credit utilization significantly. May 2020 has a nice ring to it I have 3 years left to pay on my aut loan at $565/month. Do you think focusing on paying the $20k auto loan balance down first is a good idea? Or...should I pay down/off the smaller balances first for a greater impact to my mortgage fico score??? Again....I appreciate you taking the time to reply to my obvious outreach for clarity of direction.

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You're welcome BrownSugah66. IMHO, work on paying off as many credit cards as possible, leaving one with a balance of <8.9%. I suggest not worrying about the auto loan. I think you're okay on that front. 

[Anonymous]

When you start knocking those cc's down to zero, think your scores will improve quickly. Try and get those higher utilization accounts down first, then work on the rest. Maybe do product combine on some of those?

What a great time to pursue your own home -- interest rates definitely in your favor. Your profile is solid (only one payment missed!) and will react well to those pay downs.

[BrownSugah66]

time2rebound...THANK YOU so much for replying and for your words of encouragement I appreciate it.