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Do you think we should wait? Or try?


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My husband and I have owned our 1st house for about 3 years now. We were ontime for the first 2 years, and over the last 12 months we show 2 30 day lates (due to some lawyer fees had to pay for custody battle) Which really strapped us financially. Now we are "back to normal"

We have about 55,000 in equity, and want a new mortgage for around 190,000 (to buy a house in the 240,000's.

My scores are

TU 623

EQ 573

EX 623

and hubbys are

TU 654

EQ 650

EX 634

which we got off of myfico.com

Right now we have about 4000 in CC debt, and a car loan for 6000 and 1 collection account for $250 that we are paying off right now.

We were planning on waiting untill next summer, but I am getting anxious. I think we should wait and pay off the CC debt...what do you all think?

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Do you know if your debt ratio would qualify on the new mortgage?

When were the two 30 day mortgage lates? Once past 12 months several Alt-A lenders will qualify you so you'd be out of sub-prime programs, a conforming loan product might also qualify you because you'd have a nice down payment, think it'd be more likely you would get an Expanded Approval Level I which are comparable to Alt-A loan programs.. considering your W-2's & paycheck stubs or tax returns would qualify you. Otherwise if you had to do a stated income documentation type an Alt-A loan could work out.

Does the CC debt have high utilization? If so paying it off/down would have a significantly positive effect on your scores.. and IMO from seeing enough credit reports and doing rapid rescoring, for maximizing scores paying off all revolving trade lines could help.

When was the collection from? If it was recent or recently updated then paying it off probably will do some good, but if it's from long ago and hasn't updated since then paying it off would probably lower your scores by re-aging it. It might be required to be paid through escrow, if so, might as well pay it then and let the score update after you obtain the mortgage. If you haven't already, "Opt Out" so the CA doesn't re-age the account because they see you trying to qualify for a mortgage.

Are you going to be selling first and then buying, or trying to arrange both transactions simultaneously?

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I would suggest that you don't pay off the collection account until closing. It will lower your credit scores instead of raising them.

Your first goal to raise your scores is to have your credit cards at <50% of utilization, then <35%, then <20$. If you are over the 50% on any card, and get to under 50%, you will see a great increase.

If you can wait until you are post 12 months of slow home payment, you will see a nice increase in your scores also, and you will have a lot more programs available to you-lower interest rate-etc.


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