Will we ever own a home? :(

[Insomnia]

I'm starting to lose all hope after a couple of denials from a local bank and Embrace Home Loans.  Will we ever own a home?  Here is some info on our situation.  My husband has a middle score of 630, and he's been paying car payments on time for almost two years.  Rent is paid using cash (not checks) so that was one of the reasons why we were declined.  They wanted cancelled checks to prove we were making payments, and a written agreement wasn't good enough.   I'm not sure we can manage a two year wait even IF we did start paying with checks...  Are there any lenders that will help us soon?  Any previous experiences you can share?  We are looking to get an FHA loan, and they are definitely strict with things from what we've seen so far.   

Any input is greatly appreciated!  Feel free to post here or private message me.  Thank you.

[drkaje]

If it's a very thin file, switching to checks might help. You'll also have to build some credit, though.

If there are past mistakes, you'll need to do some repair.

What anyone can respond with is limited. There's nothing in the post to explain his middle score being in the 630 range or reasons why your score wouldn't help.

[Insomnia]

Bills are always paid on time, we have a credit card that is paid every month, and a car payment that was never late.  Our score seems to be increasing little by little.  The wait is definitely the hardest part.  We're doing all we can right now.

[drkaje]

If there are no negatives, whatsoever, it might be a case of paying credit cards on time but not necessarily in a way that helps your scores. Basicaly, balance should be paid down less than 10% of your total credit limit before closing date. This will help utilization look better.

[vlaw1084]

What State are you in?   If your in my state I could refer you to someone who does loans. The Mortgage company I used also has offices in most others.

[jules0580]

If you can get his score higher you wont need rental verification. So thats a possibilty. Like a previous poster stated, if you can try to get your Utilization down to 10% you may see a big jump in score (if your utilization is higher than 30% now that is)

[StartingOver10]

It sounds like you are looking for your first home. I'm a Realtor and work with many first time homebuyers. It's not that you can't buy. It's that you need to prepare your file to make your loan attractive to lenders using their standards to meet their risk models. Right now you appear risky based on their criteria. Prepping to buy a house and get the mortgage is normal. We just didn't do it as much when the market was going nuts from 2003 to 2006 and people don't remember what it was like before - especially if you never have been through the process. It is completely normal to prepare your file so you present your best self to the lender to get the most attractive loan available to you.

One of the important factors when you are looking for a mortgage is to show to the lender you have the ability to repay the loan.

Because you are looking for a high LTV (FHA is usually 96.5%) and the loan is insured to induce the lender to make the loan with those high LTV's; there are certain requirements that FHA is looking for in order to meet the loan insurance requirements (MI).  FHA doesn't make the loan, they insure the top portion of the loan to induce the lender to make the loan. The lender then has their own requirements that are more restrictive than the FHA requirements.

The combination of a low down payment, low credit score and no verifiable history of rent is hurting you with your current lender(s). Most lenders would not approve you with that combo.

Have you considered taking the next 12 months to 1) increase the credit score and 2) show 12 months of verifiable rental history with a check payment or money order payment and 3) an increase in savings to diminish the risk to the lender? Consider putting down 5% or even 10% as a down payment on the house and that will do a couple of positive things for you. It will be used as a compensating factor in your file (a good thing) and it will reduce your monthly MI payment to FHA and save you over the long run.

However, the big item is the rental history (as you discovered). Verifiable rental history is a critical  factor for a government insured FHA loan. A letter from the landlord won't do it anymore especially if you are in a risky market like Florida, Arizona, California, Nevada, Michigan etc. Take the next 12 months and pay your rent on time everytime with a check or money order. Or use bill pay if your bank will allow bill pay to an individual. This alone will help you get your loan.

Sorry for the book and the history lesson. Thought it might help you to understand the reasoning behind the lenders requests.

[tammyjk]

You also stated "credit card" as in one?  As someone else said, it may be a matter of a very thin file. 

[FrugalRican]

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@drkaje wrote:

What anyone can respond with is limited. There's nothing in the post to explain his middle score being in the 630 range or reasons why your score wouldn't help.

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BINGO.

And still a lack of response as to the 630 and why its so low.

It's virtually impossible to help without more information.

As StartingOver said, this is about being attractive enough to lenders that you can get a loan. But with limited information, we won't know how to help you get there.

A LOT of people can have a mid score of 630 and pay credit cards on time as well as a car, but there could be so many additional variables to it... we need to know SPECIFICS.

[Insomnia]

Sorry for not explaining more in detail about the score.  He is still new to building credit, so that is why the middle score is only 630 right now.  About 1-2 years ago, he had no file at all.  So its not about owing money to anyone, its more about building his credit at this time.