Is my score good enough? Panicking!

[MichelleLynn]

I am looking to get approved for a loan, but my hubby's credit score is not too great - 615. We have not had any bankruptcies, all collection accounts are paid off, we haven't been more than a month late on any cards for over a year. In fact, we paid all our credit cards off at the beginning of this month, but they are not showing up yet on the FICO scoresheet. Before 2002 we were late a lot, and it's still affecting our scores. We have enough to put up to 30% down on the house we want, and our loan amount is for less than we could be prequalified for. I'm still afraid I won't get preapproval, and we've alread found our dream house. I'm really afraid of it slipping away from us if we don't hurry. Help! Thanks!

[amortgageman]

Credit wise you arein really good shape to getting a mortgage approval, but there are other factors which go into actually qualifying for a mortgage. The determining credit score is the middle score of the highest wage earner.

The first thing is steady employment for two years. It's OK if there has been a job cjhange within the two year period as long as you (or your DH) are in the same field of work. Frequent job hopping can cause a mortgage approval to go south, but if the person is always putting themselves in a better position and making more money, then everything should be fine.

Second, would be a good credit history, which it appears that you already have, due to the fact that you mention no late payments on your credit cards in over a year. Ideally, most lenders will want to see a mix of credit for greater than two years, at least three accounts, and one account over $5,000.00 high limit (an auto loan is usually used for the high limit)

Next, is proving a twelve month rental history. Most lenders will require cancelled checks from private landlords, or a verification of rent, if from a professional rental company (like an apartment complex).

You may want to consider a mortgage broker to get you into the best Alt A program, as there are many options available that will help you out. Sometimes you can get very favorable rates this way, and with a 30% down payment, there will be many open doors available to you and your husband.

Personally, I would consider taking the loan through an automated underwriting engine (like Freddie Mac) to see iif your can get an approval even though your scores are a little less than 620. This will get you the best rates. Next, give an FHA approval a try. With no open collections, and if the job history is solid, then you should be able to get approved this way. The disadvantage to an FHA approval, would be PMI insurance. This is equal to 0.5% increase on your interest rate, and you will want to put as little down as possible to get an approval. After a year or so, you can then pay down the mortgage to below 77% and cancel PMI insurance, as long as twelve months of payments have been made on time. Outside of that, there will be many, many opportunities available with slightly higher interest rates.

Good Luck, and fear not.

[MichelleLynn]

Thanks MortgageMan! We went to a mortgage broker this evening and he said he was going to try to "massage" our application a little (whatever that means) and try to get us a conventional loan. Otherwise, he said we should be able to qualify for another program but at a higher interest rate. He's supposed to get back with us tomorrow. I don't know what credit reporting system he was looking at, but he said it didn't tell him when the deliquencies occured - just the number of them. I wonder if the lender will take into account that all the delinquencies were over a year ago. I'll get educated about the Freddie Mac & FHA stuff tonight. From looking at the FICO report and how low down on the scale score we were, I figured we'd be very hard to finanace. I feel a little better about the whole thing now.

[DallasLoanGuy]

if your broker cant get you a conventional deal... dont let him/her sell you on a subprime loan.

try fha first

or at least compare the fha deal.....

[firstsource]

MichelleLynn,

When he said "massaging" your loan, probably meant that he was going to run both of the different automated approval systems that are acceptible to conforming lenders. These two systems have slightly different approval "models", and many times a situation that will get a denial from one will get an approval from another.

Hope that helps.

Charles