Question abt rebuilding for mortgage loan

[2021homesteadgoals]

Hi guys!

I have been this forum for days now! You guys are incredible and so nice and helpful! I wanted to ask some advise on our situation. We are hoping to apply for a mortgage in the next few months but not sure which way to go to get the numbers up. We went through a terrible time with a job loss and had to move across country so yada yada here we are rebuilding. So the good news is all of our baddies are low amounts and they were agencies that have already written us settlement letters that say they will delete off when we pay! Great! Especially these are still reporting monthly! Should we see a significant score increase after these come off? Next, Toyota! Oh man. We are caught up. But for man months we were not. Will try a goodwill but fear we are stuck with those- anyone have ideas to deal with Toyota? Finally, I am so confused abt whether we should apply for a credit card or not- to boost score or just let it rise up when the collections delete off! We have zero credit cards. Thanks for reading and input! Have a great day and stay safe!

[dragontears]

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@2021homesteadgoals wrote:

Hi guys!

I have been this forum for days now! You guys are incredible and so nice and helpful! I wanted to ask some advise on our situation. We are hoping to apply for a mortgage in the next few months but not sure which way to go to get the numbers up. We went through a terrible time with a job loss and had to move across country so yada yada here we are rebuilding. So the good news is all of our baddies are low amounts and they were agencies that have already written us settlement letters that say they will delete off when we pay! Great! Especially these are still reporting monthly! Should we see a significant score increase after these come off? Next, Toyota! Oh man. We are caught up. But for man months we were not. Will try a goodwill but fear we are stuck with those- anyone have ideas to deal with Toyota? Finally, I am so confused abt whether we should apply for a credit card or not- to boost score or just let it rise up when the collections delete off! We have zero credit cards. Thanks for reading and input! Have a great day and stay safe!

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While the normal advice is to not apply for credit in the year before a mortgage application due to the damage a new accounts have on mortgage scores, IF you have no open credit cards your scores will not get out of the low 600s. Getting a card will likely raise your scores assuming you don't max it out. 

What is your middle mortgage score right now? 

And finally welcome to the forum 

[2021homesteadgoals]

Thank you for your response! Exactly! Thats where my concern lies.  If we don't do anything we for sure will not be able to pull out of the low 600's.  Currently mid is 602! very low!

[CyberChick]

I'm in a similar situation. I have played around with the simulators and I don't expect more than a few points when the paid collections fall off. Also, if I were to apply for more credit my scores will stay the same. I am not going to apply for any new credit until after I close on the house. I'm not even going to refi my car, I don't need it to decrease my debt-to-income ratio - so everything is status quo until I get the mortage.

The simulators show me seeing seeing the most impact by doing the AZEO method, which I read about in this forum.  The paid collections look good for conventional lenders, but I'm waiting a few weeks for the real updates from myFICO, but I am seeing some collections being removed. I"m optimistic, keep the faith - you got this. 

[gdale6]

you need 3 open revolving credit cards to maximize your Fico score and be sure to keep them paid off with the exception of one repporting a small balance of its CL each month to the CRAs as there is a loss of Fico points for having no balance on any credit cards. Credit cards have more of an impact on your Fico scores than any other type of credit. 30% of Fico is based on their utilization percentages.

[SweetCreditObsession]

Lenders like to see no new accounts within at least 12 months of applying for a loan. Try to pay off those baddies so they delete and request soft inquiry credit line increases on any active credit cards (if applicable). Make sure your card utilization are under 28.5 if possible.

Finally, you might find helpful tips in the Mortgage Loans section of these forums.

[RobertEG]

Also, while important, credit score is not the only significant factor governing how to prepare for a mortgage loan.

Differing types of loans, such as VA or FHA, have certain requirements outside of simple credit score, and lendors have discretion in their underwriting process regardless of any governing regulatory requirements.

I would recommend contact with the prospective lendor for advice as to their underwriting requirements, such as payment of any collections or other delinquent debts, regardless of credit score implications.

If payment of certain collections is required, for example, that will have an overriding impact on your rebuilding plan......

[Anonymous]

I know I'm a little late to the party, but you also may want to research FHA lenders with no overlays. They only adhere to FHA guidelines and do not have additional requirements of their own (ex: FHA is ok with 580 mortgage FICO but most conventional  lenders require an absolute minimum of 620, or FHA doesn't include unpaid charge offs as having to be paid but the lender that is financing would most likely require pay off). They aren't everywhere, but it is possible (that is, if you are looking into an FHA loan).