What version of fico does trimerge use, ARM and refincing and other questions below

[bluedog357]

FICO8 SCORES 676EQ 685TU 699EX

FICO5/4/2 674EQ 671TU 657EX

(Wifes scores are close to the same)

Very good income

2 cards with high debt ratio 

both cars paid off.

Student loan on a forgivness program

My wife and I moved to a new city about 4 years ago. We had to fix up our old house and sell it (took about 2 years to save for the out of pocket expenses to fix it up. We have been fixing our credit and saving for a downpayment for a house. Our original target number for a house was 350k (we have the ability to put 5% down which is about 17.5k with no PMI with a min credit score of 680). We have about 12k saved for the DP. Then covid hit and the market ballooned. The 350k houses in our area (unless we want to live way out and commute which we do not) are not in good areas.  So our target moved from 350k to 400-450k which will require a DP of a little over 22k, and we would have to come up with closing costs.

Now we can do an 10/1 ARM which requires 3% down and a target score of 620. I know the risks of an ARM...but it does get us in a house and (ideally) our credit scores would continue to raise and we could continue to save up money and refinance before year 11 to avoid and intrest hike.

In our area it does not look like the market is going to go down. Maybe it will plateau a bit, but it seems we are at risk of being priced out(and if thats the case we may be priced out rent wise as well)

We have the scores now to get into an ARM and refinance later. Now our FICO8 scores seem to moving up fast, but our FICO 5/4/2 scores seem to be moving up much slower. We do have 2 more cards we have to clean up which should give us a boost, but I do not think it will give use the boost we need in the 5/4/2 area(but shoud in the FICO8 area).

I have asked 2 different lenders which version of FICO they use. One was unsure, the other said "tri-merge." Im not sure which version of FICO tri-merge uses and neither were they.

Both of our cars are paid for. Hers is decent, mine is a clunker. I have been waiting to buy a decently priced used truck. My initial thought process was to wait until we get our house...but now Im thinking that maybe a payment (while yes would increase our DTI) would help boost our scores after about 6 months or so.

My options seem to be as follows:

1) (the better option between 1 and 2 mortgage wise) stay the course, continue to save for the DP of 22.5k plus 3% or so closing cost for the fixed loan. The risk is by the time we save the DP the market would have jumped and the DP would not be enough for the new market prices. We would need to wait until our median score jumped about 30 points if they use fico5/4/2

2) (the worse option between 1 and 2 mortgage wise) Go with the 10/1 ARM, use what we have for the 3%DP. Get a house, continue to save while credit score keeps going up and then ReFi into a fixed within the first 3 years, expecting a apr hike of 1-2% due to the expected trend of rising interest rates(i know intrest rates are low now, but potentially they will be high by the time we hit the DP and credit score goal for option 1 anyway) risks are something goes sideways and by the time year 11 hits we have not RiFied and get hit with a high intreste rate

So I have a couple major questions

1) how quickly do fico5/4/2 scores move in relation to an upward movement of FICO8. We have made huge leaps in our credit scores (from fico8  the mid 5s and low 6s to what they are now in about 1 1/2 to 2 years)

2)What version of Fico does tri-merge use? The fico8 or fico 5/4/2...or something else?

3)as mentioned early I have been waiting to buy a better and more reliable vehicle until after we get a house...but is it possible that getting a low car payment could be helpful. I would only do this if it would help boosts our 5/4/2 scores rapidly enough for us to take option 1. Otherwise I am totally willing (even if begrudgingly) to wait until after we get a house to get a newer (not new) vehicle.

Yes I know that it would increase my DTI...but maybe after 6 months of payments it would boost our 5/4/2 scores upward to where would hit the credit score needed for option 1

My main concern is that the longer we wait the more likely it is that we get priced out. Neither of us can work from home, and due to our schedule and our kids it is extremely difficult for us to commute an hour to work. On one hand Im very very wary or an ARM loan, on the other I feel like it could get us into something now and let us refi into a fixed when we have the remaining DP/credit scores necessary. I know that it is impossible to time the market, and in our area (tampa if that helps) I feel like it is not going to go down anytime soon and my job is tied to the area. For my industry it is one of the highest paid areas in the SE and has one of the best pensions for my industry in the country.

Willing to here any and all thoughts/advice.

Thanks

[JVille]

Trimerge is simply the Merging of 3 Credit Reports and for mortgage purposes it is Fico 5,4, & 2 (NOT Fico 8). The lender will take the lowest Middle Score when looking at all borrowers. In my case my husband is all 800+ but in mine my middle score at last Mortgage Application was 730... they used my middle score rather than hubby's fabulous scores. 
Ignore Fico 8 they always are much different and give a false sense of security. 
It is fairly common for Lenders to not understand anything about Fico Scores and only understand the resulting Credit Report and the Middle Score to be used. A mortgage broker is more likely to have that knowledge vs a bank LO.

[CreditFun]

They now average the middle score between two borrowers.

[bluedog357]

I assumed they took the middle score of both applicants.. is this what you mean or do you mean something else?

Also how accurate are the fico 5/4/2 scores on the app to what they are when seen by creditors? Im thinking of having one of the lenders we are looking at do a soft pull to see what it looks like in their system...would this ding my credit a few points? If so ill just wait until we are closer to our DP goal.

[jobber123rd]

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@bluedog357 wrote:

I assumed they took the middle score of both applicants.. is this what you mean or do you mean something else?

---

Previously they took the lower of the applicants' middle scores (as what happened in JVille's case).  Now they average the middle scores.

Also how accurate are the fico 5/4/2 scores on the app to what they are when seen by creditors? Im thinking of having one of the lenders we are looking at do a soft pull to see what it looks like in their system...would this ding my credit a few points? If so ill just wait until we are closer to our DP goal.

---

It should be the same.  By definition a soft pull won't affect your scores.  (Just make sure it is a soft pull, or otherwise be prepared to take advantage of the hard pull deduplication window to get all your mortgage app inquries scored as just one inquiry.)

[805orbust]

Dude... if you've got good income, the best thing you can do right now is pay off one of those cards and get the other one at or below 10%. Qualifying for the best interest rate will be better than putting down more money. If you don't have any derogatory items you should be solidly in the 700's and they'll throw money at you.

PLEASE don't do an ARM!!

All my humble opinion tho. 🙂

[mgs2010]

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@bluedog357 wrote:

FICO8 SCORES 676EQ 685TU 699EX

FICO5/4/2 674EQ 671TU 657EX

(Wifes scores are close to the same)

Very good income

2 cards with high debt ratio 

both cars paid off.

Student loan on a forgivness program

My wife and I moved to a new city about 4 years ago. We had to fix up our old house and sell it (took about 2 years to save for the out of pocket expenses to fix it up. We have been fixing our credit and saving for a downpayment for a house. Our original target number for a house was 350k (we have the ability to put 5% down which is about 17.5k with no PMI with a min credit score of 680). We have about 12k saved for the DP. Then covid hit and the market ballooned. The 350k houses in our area (unless we want to live way out and commute which we do not) are not in good areas.  So our target moved from 350k to 400-450k which will require a DP of a little over 22k, and we would have to come up with closing costs.

Now we can do an 10/1 ARM which requires 3% down and a target score of 620. I know the risks of an ARM...but it does get us in a house and (ideally) our credit scores would continue to raise and we could continue to save up money and refinance before year 11 to avoid and intrest hike.

In our area it does not look like the market is going to go down. Maybe it will plateau a bit, but it seems we are at risk of being priced out(and if thats the case we may be priced out rent wise as well)

We have the scores now to get into an ARM and refinance later. Now our FICO8 scores seem to moving up fast, but our FICO 5/4/2 scores seem to be moving up much slower. We do have 2 more cards we have to clean up which should give us a boost, but I do not think it will give use the boost we need in the 5/4/2 area(but shoud in the FICO8 area).

I have asked 2 different lenders which version of FICO they use. One was unsure, the other said "tri-merge." Im not sure which version of FICO tri-merge uses and neither were they.

Both of our cars are paid for. Hers is decent, mine is a clunker. I have been waiting to buy a decently priced used truck. My initial thought process was to wait until we get our house...but now Im thinking that maybe a payment (while yes would increase our DTI) would help boost our scores after about 6 months or so.

My options seem to be as follows:

1) (the better option between 1 and 2 mortgage wise) stay the course, continue to save for the DP of 22.5k plus 3% or so closing cost for the fixed loan. The risk is by the time we save the DP the market would have jumped and the DP would not be enough for the new market prices. We would need to wait until our median score jumped about 30 points if they use fico5/4/2

2) (the worse option between 1 and 2 mortgage wise) Go with the 10/1 ARM, use what we have for the 3%DP. Get a house, continue to save while credit score keeps going up and then ReFi into a fixed within the first 3 years, expecting a apr hike of 1-2% due to the expected trend of rising interest rates(i know intrest rates are low now, but potentially they will be high by the time we hit the DP and credit score goal for option 1 anyway) risks are something goes sideways and by the time year 11 hits we have not RiFied and get hit with a high intreste rate

So I have a couple major questions

1) how quickly do fico5/4/2 scores move in relation to an upward movement of FICO8. We have made huge leaps in our credit scores (from fico8  the mid 5s and low 6s to what they are now in about 1 1/2 to 2 years)

2)What version of Fico does tri-merge use? The fico8 or fico 5/4/2...or something else?

3)as mentioned early I have been waiting to buy a better and more reliable vehicle until after we get a house...but is it possible that getting a low car payment could be helpful. I would only do this if it would help boosts our 5/4/2 scores rapidly enough for us to take option 1. Otherwise I am totally willing (even if begrudgingly) to wait until after we get a house to get a newer (not new) vehicle.

Yes I know that it would increase my DTI...but maybe after 6 months of payments it would boost our 5/4/2 scores upward to where would hit the credit score needed for option 1

My main concern is that the longer we wait the more likely it is that we get priced out. Neither of us can work from home, and due to our schedule and our kids it is extremely difficult for us to commute an hour to work. On one hand Im very very wary or an ARM loan, on the other I feel like it could get us into something now and let us refi into a fixed when we have the remaining DP/credit scores necessary. I know that it is impossible to time the market, and in our area (tampa if that helps) I feel like it is not going to go down anytime soon and my job is tied to the area. For my industry it is one of the highest paid areas in the SE and has one of the best pensions for my industry in the country.

Willing to here any and all thoughts/advice.

Thanks

---

How long ago did you sell the house? If you haven't owned in 3 years, you are considered a first time buyer again and with that being said, you can do 3% down conventional fixed rate all day! I am a loan officer and have personally never heard of a special down payment of 3% if taking a ARM and would caution against that plan. Getting an ARM in a rising rates climate is never a good move - and for that matter, getting an ARM of any sort is completely out of the question unless your plan is to sell and you're just looking for the most affordable payment (lower rate)

I would strongly suggest that you do not go into ANY mortgage on the assumption that you can refinance later. Always think worst possible case scenario - i.e. rates heavily increase and values drop so you're underwater for several years, etc. You just never know so I always urge my clients to go into the mortgage on the assumption that you may stay in it for the long haul. 

If it were me and funds were tight, I would personally look to do a conventional fixed rate and in an effort to save on your closing costs, maybe opt for a slightly higher than market interest rate in exchange for a lender credit to reduce your overall out of pocket at close. At least it would be a fixed rate that you do not have to worry about in the future. Best case, you can refi later to a lower rate. Worst case? you're stuck paying the same P&I payment that you've been used to since day 1. No harm no foul. 

Good luck to you. 

[VALoanMaster]

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@bluedog357 wrote:

FICO8 SCORES 676EQ 685TU 699EX

FICO5/4/2 674EQ 671TU 657EX

(Wifes scores are close to the same)

Very good income

2 cards with high debt ratio 

both cars paid off.

Student loan on a forgivness program

My wife and I moved to a new city about 4 years ago. We had to fix up our old house and sell it (took about 2 years to save for the out of pocket expenses to fix it up. We have been fixing our credit and saving for a downpayment for a house. Our original target number for a house was 350k (we have the ability to put 5% down which is about 17.5k with no PMI with a min credit score of 680). We have about 12k saved for the DP. Then covid hit and the market ballooned. The 350k houses in our area (unless we want to live way out and commute which we do not) are not in good areas.  So our target moved from 350k to 400-450k which will require a DP of a little over 22k, and we would have to come up with closing costs.

Now we can do an 10/1 ARM which requires 3% down and a target score of 620. I know the risks of an ARM...but it does get us in a house and (ideally) our credit scores would continue to raise and we could continue to save up money and refinance before year 11 to avoid and intrest hike.

In our area it does not look like the market is going to go down. Maybe it will plateau a bit, but it seems we are at risk of being priced out(and if thats the case we may be priced out rent wise as well)

We have the scores now to get into an ARM and refinance later. Now our FICO8 scores seem to moving up fast, but our FICO 5/4/2 scores seem to be moving up much slower. We do have 2 more cards we have to clean up which should give us a boost, but I do not think it will give use the boost we need in the 5/4/2 area(but shoud in the FICO8 area).

I have asked 2 different lenders which version of FICO they use. One was unsure, the other said "tri-merge." Im not sure which version of FICO tri-merge uses and neither were they.

Both of our cars are paid for. Hers is decent, mine is a clunker. I have been waiting to buy a decently priced used truck. My initial thought process was to wait until we get our house...but now Im thinking that maybe a payment (while yes would increase our DTI) would help boost our scores after about 6 months or so.

My options seem to be as follows:

1) (the better option between 1 and 2 mortgage wise) stay the course, continue to save for the DP of 22.5k plus 3% or so closing cost for the fixed loan. The risk is by the time we save the DP the market would have jumped and the DP would not be enough for the new market prices. We would need to wait until our median score jumped about 30 points if they use fico5/4/2

2) (the worse option between 1 and 2 mortgage wise) Go with the 10/1 ARM, use what we have for the 3%DP. Get a house, continue to save while credit score keeps going up and then ReFi into a fixed within the first 3 years, expecting a apr hike of 1-2% due to the expected trend of rising interest rates(i know intrest rates are low now, but potentially they will be high by the time we hit the DP and credit score goal for option 1 anyway) risks are something goes sideways and by the time year 11 hits we have not RiFied and get hit with a high intreste rate

So I have a couple major questions

1) how quickly do fico5/4/2 scores move in relation to an upward movement of FICO8. We have made huge leaps in our credit scores (from fico8  the mid 5s and low 6s to what they are now in about 1 1/2 to 2 years)

2)What version of Fico does tri-merge use? The fico8 or fico 5/4/2...or something else?

3)as mentioned early I have been waiting to buy a better and more reliable vehicle until after we get a house...but is it possible that getting a low car payment could be helpful. I would only do this if it would help boosts our 5/4/2 scores rapidly enough for us to take option 1. Otherwise I am totally willing (even if begrudgingly) to wait until after we get a house to get a newer (not new) vehicle.

Yes I know that it would increase my DTI...but maybe after 6 months of payments it would boost our 5/4/2 scores upward to where would hit the credit score needed for option 1

My main concern is that the longer we wait the more likely it is that we get priced out. Neither of us can work from home, and due to our schedule and our kids it is extremely difficult for us to commute an hour to work. On one hand Im very very wary or an ARM loan, on the other I feel like it could get us into something now and let us refi into a fixed when we have the remaining DP/credit scores necessary. I know that it is impossible to time the market, and in our area (tampa if that helps) I feel like it is not going to go down anytime soon and my job is tied to the area. For my industry it is one of the highest paid areas in the SE and has one of the best pensions for my industry in the country.

Willing to here any and all thoughts/advice.

Thanks

---

To clarify. Lenders pull a tri-merge credit report which gives us all 3 bureaus in one report.

Each bureau has their own scoring model,

Experian is 2, TransUnion is 4 and Equifax is 5.

99% of mortgage lenders us 5,4,2. I've heard that some random credit unions will use something else.

The 2 lenders you spoke to that couldn't tell you what scoring model they use were probably pretty green so you'll want to move on from them.

Instead of trying to figure things out on your own, you should have a lender pull your credit and run some credit sims to see what it will it take to boost your mortgage scores. As a lender, we can also do a rapid re-score to speed up the process.

The down side about refinancing later, you have no idea what rates will be. What happens if rates jump to 7% by the time you're ready to refi?

To all the people saying lenders average the mid score between both borrowers, that's not 100% accurate.

Fannie Mae has updated their automated underwriting system to average the mid score of all parties for conventional loans but's just to help more people qualify. For example: You need a 620 score to qualify so if you have 1 person with a 600 score and another person with a 720 score the person with a 600 score would not have qualified under the old guidelines. Under the new guidelines, the average 600+720 = 1,320/2 = 660.