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Only problem is credit scores. What should I expect?


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We are looking into applying for a loan to buy a home. We will be first time buyers.

My income is $50,000 but I carry both our vehicles in my name(debt ratio at 56%) with both cars.

Our combined income is $80,000 with a combined housing ratio with the new home of 29.6% and debt ratio of 31%.

The problem is credit scores. My 3 scores are 645,642,639. Hers are 565,562,585. What would be the best chance of getting the lowest interest rate on a 30 yr fixed? Do we even qualify in the ballpark using her scores?

The house we are looking at has an asking price of 143,500. We plan to only put down prob 3%. I am being told area rates are hovering around 5.25% give or take. What should I expect? Guesses are better than nothing.

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Those 5.25% rates that you see advertised are for first mortgages with an 80% loan to value. Good credit and debt ratios no higher than 36%, with at least two months reserves (total payment, taxes, insurance, principal, interest).

How is your overall credit picture? Any collections, judgmnets, chargeoffs, late payments within the last two years. What about job history (two years continuous employment)?

Could you please give a listing of your monthly credit obligations, then we can help you figure the exact debt to income ratios of what you may qualify for?

The price range you are looking at would easily fit in the ranges of FHA financing, but there is PMI insurance added to the payment. FHA guidelines allow for 29% housing and 41% total debt. With a combined income of $80,000, you would easily qualify for the housing ratio.

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OK we posted at the same time. Here is more info for you:

80,000 income


545 car

540 car

96 credit card

31 credit card

50 credit card

600 current rent(have wasted 240 per month for day care to be applied to mortgage that will be eliminated because our 13yr olds will be getting off the bus at the new home= no more day care for a hour!)= 840

Have a total debt of 6300 for credit cards, 52,000 for both autos

Only one negative on my credit is a tax lien for $133 that shows released on cr report), waiting on letter from tax commision to get removed

One 30 day late on one revolving account in past 2 yrs)

Wife is different story, has one payoff from 2-3 yrs ago, also has a collection for $1400 from 1 year ago. This is why her credit suffers so.

Prob 2-3 30 day lates.

Thanks for the reply.

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Your best option would be to go ahead and pay the collection off (as long as it is her debt), and writing letters of explanations for the recent late payments. You would then qualify for FHA financing, and get the best mortgage for your situation. Interest rates are very similar but there is PMI insurance which will add 0.5% to your rate, so you would be in for less than 6% interest rate. With a 3% down payment, or flexible sellers, you should be able to accoplish your goals. I cannot think of a better option with the scenario presented.

You are right that with both car payments reflecting in your debt to income ratio, that you will need to get a little more fancy with a stated income or bank statement (provided you both deposit to the same checking account).

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I have about 6000 for closing/down payment. I will prob wait until they work us up to payoff the 1400(as it will take away from the 6000) until they tell I must.

No. We have separate checking accounts and get direct deposit into each account. My car payment always comes from my account and vise versa for her. We actually have $85000 total gross with her child support but again this adds to her income and not mine.

If I could get in at around 6ish I would be happy with this. I can work on Credit(now that I know more about the credit reporting) over the next several months and refi down the road. At least I won't be throwing &840 out the window for those months. What would be your opinion on a max rate before you would just continue to rent for 6-12 months until credit is cleaned up more? Thanks again for the reply.

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Down the line in this section is a thread dedicated to mortgage rates and a poll for all of us to guess.

Now you have me guessing though........

You want to not pay a collection for $1,400.00 and would accept a higher rate now and refinance down the road, which would cost $2,500.00 (minimum), but the collection would still be there (which will still keep you paying more than necessary), and in the meantime may turn into a judgment, hurting her credit score even more.

If you want the best of mortgage rates the collection will have to go sooner of later. In my opinion, sooner will be better, and you are probably only about $800.00 away from your goal (without getting creative and using gift funds). I wish they were all that easy.

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OK. If understand you correctly you say I should pay the collection of 1400 which leaves me 4600 to close. If I pay the 1400 won't I have to wait a couple of months to reap the benefits of the payoff though?

If its not too much trouble could you briefly tell me how you are arriving at being $800 out. I will sell some junk on Ebay tonight if i am that close.

I guess the point is being able to do sometime now vs. waiting 3-5 months to straighten out credit problems. I also am not willing to go withthe much higher rate either.

I will try and justify in my mind when the numbers are given to me and by the end of that night I will have convinced myself that the deal MUST be done. That is how it will be. I want to avoid that. I am just trying to get a foundation for where the numbers should/could be first. Thanks so much. I appreciate the feedback. I didn't know a thing about mortgages a week ago. Now 5 books and 2a.m. nights have given me a foundation. Your feedback is helping me more than you could imagine.

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Just went over every negative item on our reports(all 3)


No derog public records

One collection for $627(from 2001) last reported delinquency on May 2003 - looks like this one hasn't been charged off means I guess I must pay it

Under delinquencies and derog

One installment account chrged off as bad debt closed on Nov 2002


No derof public records

2 Collections for drs bills one $151 and one for $46

both show status and being PAID March 2004


$1404 Bad debt/Collection says last activity Aug 2001 but last payment history is 10/2002 charged off - maybe this one doesn't have to be paid after all?

Now for my reports:


Derog public record

State tax lien $513 not on record

Called and they are sending me a letter showing this was a mistake. This was paid some time ago. Haven't gotten letter yet but is released

No collections

1 30 day late payment 1 yr ago

1 30 day late payment 1.5 yr ago

1 30 days late payment 154 mos ago

All three above are 3 different accounts of 10 total accounts. None of which are showing negative description


Same as above


Derog public record

State tax lien $133 released Aug 1999

No other items other than the 3 30 day lates as above

Which items would need to be addressed and would the lender accept letters and receipts for payoffs. I assume the $627 would most definitely need to be paid ASAP but what about the other one the $1407? 2 yrs old?

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