Erika Posted October 8, 2004 Report Share Posted October 8, 2004 We're trying our darndest to get out credit score up above 600 in the next few months (probably 4-5 months) in order to qualify for an 80/20, 0 down loan. In the meantime, we're saving for the 5% for closing if that doesn't pan out.So, would it be okay to go take out a $1000 share secured loan and pay it back within the next couple of months for a boost in credit score or would that look worse for our mortgage approval?Thanks! Link to comment Share on other sites More sharing options...
firstsource Posted October 8, 2004 Report Share Posted October 8, 2004 I would suggest that you run your situation through a loan simulator, and that will give you a more clear idea of what to do to get your scores up. Also, even though the rates are not near as good, you can get an 80/20 loan with a 580 score, but do indeed try to get your scores up to 600 mid. Since you are going to wait until 4-5 months to get your home, you will see somewhat of a raise in scores, just not certain how much.Charles Link to comment Share on other sites More sharing options...
Erika Posted October 8, 2004 Author Report Share Posted October 8, 2004 Thanks Charles, I'd like to get an idea of what kind of interest rate when you say, "even though the rates are not near as good, you can get an 80/20 loan with a 580 score." With today's rates (~5.5 for 30 year fixed conventional), what are we talking here.... like 9% with 580 scores, or higher? Thanks Link to comment Share on other sites More sharing options...
amortgageman Posted October 9, 2004 Report Share Posted October 9, 2004 Erika,A lot of what affects adding a new account has to do with your credit now. If you already have more than six or seven accounts open, then adding another installment loan may not have any affect at all, and could possibly lower your credit score. On the other hand, I see many credit reports that seem to get stuck in the 560 -580 range because there have been a few late payments, and other adverse credit, and there are only one or two (or zero) open accounts. If your credit report looks like this, then adding a new account will give you a good boost to your credit score, and push it over the 600 mark.Now for the sake of executing this new installment loan flawlessly, let me share exactly how to do this.Start with $1,500. Put $1,000 into a savings account. Next get a share secured loan for $1,000. After one month, use the remaining $500.00 to pay the balance down to $500.00, continue making payments of $100.00 each for the remaining five months, until the loan is paid off. (The actual payment of $100.00 will be slightly higher because of interest charges on the loan.)You have been working on your credit report, you say. What will stop you from going through FHA financing? Collections (unpaid), judgments, or any other deragatory items? They are pretty flexible as long as you have addressed these situations, and you will benefit by getting much better interest rates.By the way, 600 would be around mid to upper 7% range, or you could opt for a 2year or 3year loan and get a lower interst rate, and refinance again later. Link to comment Share on other sites More sharing options...
Erika Posted October 9, 2004 Author Report Share Posted October 9, 2004 Thank you so much. That was very informative.What is keeping us from getting FHA? Well, our mortgage value is going to be about $260,000. I thought I heard our broker say there was a limit of $160K for FHA. Please correct me if I am wrong on that one. I think getting that secured loan will help my husbands scores immensely -- his current PG scores are 566, 571, and 608. He has two open car loans, but both will be paid off in the next two months. He has 1 open credit card account. That's it. Open accounts on my CR include those two car loans, a student loan, and one open credit card. I have three collections on my CR, my husband has one collection and one charge off we must pay before closing. I'm still working on getting those off our reports in other ways before I pay them, bump up the DOLA and our scores go down (for being responsible and paying debt... that is so bassackwards). All collections and charge offs we must pay total about $1000.Thanks again for the feedback.Erika Link to comment Share on other sites More sharing options...
morrow Posted October 9, 2004 Report Share Posted October 9, 2004 What is keeping us from getting FHA? Well, our mortgage value is going to be about $260,000. I thought I heard our broker say there was a limit of $160K for FHA. Please correct me if I am wrong on that one. Actually, I think the FHA limits vary by county. I know when we looked into it we were only allowed $xxxxxx, but if we moved further south, into the next county, that limit would bump up almost $20k MORE! Quite a difference.Either way, it was still alot less than what we spent, so FHA was outta the question for us too. Link to comment Share on other sites More sharing options...
retmar Posted October 10, 2004 Report Share Posted October 10, 2004 Ericka, just want to share with you.We applied for our Mortgage in February, 2004 with Countrywide. My DW's scores were 622, 622, and 641. Mine were 655, 655, and 614. She approved us within 5 minutes for $180,000.00 There were a total of 11 collections and other negative items being reported. Seven of them were items that should have been deleted the previous year at TU, but, they failed to delete. The others were in the process of being deleted. I showed the LO the proof that the items were to have already been deleted and explained the status of the others. There was not a problem until it went to Landsafe for research. In short, the employees do not run with a full load, but, after talking to the LO, one phone call and all was completed. Also, our CC's were near max.Do as the pros suggest and you will not go wrong. I just wanted you to see what we had at the time. Don't give up.Forgot to add that we received a 6.125% interest rate. Link to comment Share on other sites More sharing options...
amortgageman Posted October 11, 2004 Report Share Posted October 11, 2004 Erica, You win, probably too much house for FHA.FYI: Here is a link to the FHA limits.https://entp.hud.gov/idapp/html/hicostlook.cfmFor the answer to your initial question and based on the number of open accounts, the share secured loan should provide a boost to your credit scores. Link to comment Share on other sites More sharing options...
Erika Posted October 11, 2004 Author Report Share Posted October 11, 2004 Thanks for the link!Sure enough, FHA limit in my county is $160,167. If I drive 60 miles north, up Interstate, that number goes to $242K. We probably couldn't find a nice 2-bedroom, 1000 square foot home for that up there, though.I'm going to go to the Credit Union today and get that share secured loan. I'll let everyone know how it affects our scores. According to PG's what-if simulator, it raises Husband's score 4 points and mine goes down 1. I'm not going to put a lot of trust in that one though.Erika Link to comment Share on other sites More sharing options...
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