Fico Score = 550 :( what to do...

[hellyan]

Hello all,

I was advised by my wife to explain my siuation to you all. You see, my FICO score just plain sucks, however my wife's score is in the high 800s. I was wondering about two things:

1. Since my score is at 550, will any bank even touch me for a mortgage? Even if we jointly sign up for one?

2. If it's impossible to get a mortgage, should I pay off my debts NOW so that the banks can see that I am recovering?

I understand that the debt should be paid off anyways, however would paying it off now even be benefical for a mortgage in Janurary?

Well, that's probably three questions, but I am one confused person right now. Thanks for all of your advice!

[Raysway]

Have you begun any credit repair yet?

I will not speak on your ability to attain a mortgage with that score as I know little to nothing of the subject matter, but what I can tell you is that there are many things that you can do to improve your score by January. You won't work any miracles, but overall improvement is highly probable.

You'll need to read and search for info, but your wife sent you to the right place. Start here: http://www.debt-consolidation-credit-repair-service.com/forums/showthread.php?t=234405.

Good luck!

[Fozzle]

You can get a subprime mortgage in the 550 range, but it ain't gonna be great. If you and your wife have dual income, and you don't need your salary to qualify, your wife should get the mortgage in her name only -- but have the title to the property in both, or whatever you'd like. In most instances that include a first lien, lenders will take the middle score for each of you, then use the lower of those two for the qualifying score.

Unless you are referring to medical collections, the lender would want you to pay off the debt at loan closing anyway. Without knowing the stor behind your score, not much else I can offer at this time, but remember, credit scores are only part of the picture when lenders are reviewing loan packages.

[ybrew]

Start credit repair NOW. Dispute all your negs with the bureaus IMMEDIATELY.

Get added as an Auth User on some of your wife's good tradelines today!

Doing that, you could get a decent bump in your scores within 3 months. Depending on tons of factors, you could see your score near 600 by December.

But don't waste too much time in this forum - YET. Get thee to Credit repair now.

[jimdiamond]

as a licensed loan officer, I can tell you that yes, you can get a mortgage wtih those scores. however, like mentioned above, there is ALOT more to credit than just the number. usually when they are below 600 or so, there are reasons for that (recent collections, judgments, public records, liens, late payments, etc) NOW, I've closed numerous less than prime loans, with some pretty crazy things. there is a market out there on wall street for high risk loans, they offer very high returns,however, you could lose your a$$ as well by investing in them. with that said, there are sub prime lenders that will fund the loan wtih some crazy low scores, collections, judgments,etc. provided they are over 2 years old, and if they are current, as long as they are below a cummulitve of $5,000 depending on the investor you can certainly get a mortgage. for 100% financing at that, and no MI AND without even verifying income. I do them often, the rates are much higher, (which is beyond my control, the myth of lenders or bankers just giving someone a high rate to take advantage of them or use them is false, my job as a loan officer is to get them the lowest highest rate if that makes any sense).

call your loan officer and have them scrub your credit and look at it in depth.

or you could do the loan in your wifes name and have you put on title at closing, and in the meantime fix your credit, then refi once you are repaired and put your name on the loan.

whats bringing your score down exactly? im betting is recent collections/and or public records or recent lates.

good luck

[ybrew]

Most sub-prime lenders will offer 100% financing (80/20) loans with a midscore of at least 580.

But I'd recommend waiting and getting that score higher if at all possible, because rates with a 580 will suck.

[Got FICO?]

One more question on this topic.....

If the main breadwinner's score is in the Penthouse and the other significant's score is in the gutter..............what are their options in getting both incomes considered when trying to get a mortgage loan?

That was just a hypothetical situation

But I really need to know

[ybrew]

One more question on this topic.....

If the main breadwinner's score is in the Penthouse and the other significant's score is in the gutter..............what are their options in getting both incomes considered when trying to get a mortgage loan?

That was just a hypothetical situation

But I really need to know

Depends on the loan program.

For VA, I think only the Veteran's scores are used. My scores matter - my wife's really don't. but in our case, her scores are better than mine (10-20 points better).

[momof5]

The VA is not really score driven.

If you have been current on rent for a year and no lates for a year, you can get a 0 down VA loan at prime. The only consideration of the spouse is their income for the SIZE of the mortgage you can get.

[Got FICO?]

So it is possible to use both incomes and only one individual's score---middle score of course from FICO?

[ybrew]

So it is possible to use both incomes and only one individual's score---middle score of course from FICO?

Again - it depends. Is the primary borrower a veteran?

And I'm not saying the VA loan is the only loan program that primarily focuses only on one borrower. There may be other programs available.

Another option is a no-doc/stated income loan. Rates will be higher. I believe the requirement there is a 620+ fico.

[jq26]

So it is possible to use both incomes and only one individual's score---middle score of course from FICO?

I don't think so...Last year, my score was awful as I was just out of BK7. Sig other had roughly 800 credit score. I kept myself off the loan entirely as this was the only way I was told by bank and brokers that we could get into prime loan. The downside is that we had to purchase a very modest home so that my income wasn't needed even though I am the breadwinner. The upside is that this limitation created a situation where almost my entire income is untapped and gets invested. Overall, I don't think you can avoid being severely penalized for the poor credit without being off of the note entirely.

[Got FICO?]

OK that helps, unfortunately there is no up side. My husband just changed jobs to an insurance salesman where he works only on commission---not set salary schedule and I think that I read somewhere in this forum that you have to have two years of income tax returns to show when you apply for a mortgage. That may be what your referring to as the no doc (I'll have to look that one up).

Once that percentage rate goes higher then the house we want will go POOF!

The closest thing I can get to a VA loan is my father, he was in NAM.

What about FHA loans?

OK, let me put it out this way.....I would like to borrow at least 185,000; I will have around 10,000 of my own money and own 2 acre lot to build on. I make around 70,000 annually. What is my chances of getting this amount ?

[jq26]

OK, let me put it out this way.....I would like to borrow at least 185,000; I will have around 10,000 of my own money and own 2 acre lot to build on. I make around 70,000 annually. What is my chances of getting this amount ?

I think your chances are excellent. Its the rate that may be a little on the high side though. That's not much money at all, you have decent income, and you are coming to the table with assets.

Because of the land ownership and the subprime credit, a broker may be the way to go (they have access to hundreds of lenders, some having programs tailored to your situation). I'd email firstsource on this site (Charles?) and see if he has anything that your comfortable with. I do not know him but others have used him and have posted that they were pleased.

Good luck!

[Got FICO?]

I was thinking the very same thing (about Charles, I mean) but my scores have come up 100 pts. since June and I have a defaulted student loan that just got rehabbed so I am going to wait a couple more months before I take the plunge. Everything that is fixable should be fixed on my CR. That way I can get the best rate possible.

Thanks for the advice, you made me feel a little better.

[liverichly]

I was told I could get a loan (100%) I guess its 80/20 with my current scores of 546,583, and 590. I was told told I could even start looking at homes. I worked on my credit (it was worse) and the majority of my accounts are charge-offs. Do you think its possible to do 100% with these scores?

Yes 100% financing is available once you get your middle score to a 580 level, however if you are purchasing in CA I'd recommend you get your scores as high as possible. If you can't qualify for anything else other than sub-prime, then 580 scores are going to get you interest rates in the 8-9% range, on California prices that is one heckuva payment, and considerably more expensive than renting the same type of place.

If you want specific advice on your particular situation I'd recommend you create a thread of your own with some details on your credit, income, monthly debt payments, house price range you are intending to buy in, and we'll be happy to advise and guide you.

P.S. Go Giants!

[firstsource]

There are some niche programs available that will use the average of all 6 scores. There are some that will use the higher person's scores as long as that person makes 1/3 of the income-but the program limits how much can be borrowered Others that will use the higher person's scores as long that person makes 75% of the income-and there are no decreases to the LTV.

Charles

[PolarBearnCO]

...then 580 scores are going to get you interest rates in the 8-9% range, on California prices that is one heckuva payment...

Yeah, but to the one thinking about making the purchase...

First, 9% is really only about 6% effective, after considering tax deductions for the interest. Second, even 9% is still historically low. My parents purchased a $120K house in 1984 when we moved from OC, CA (hahah, funny initials) to Kansas City at 12%!!!!!

As another mentioned, consider the costs of ownership versus renting. It is really appealing to have a nice house and eventually own it free and clear, but that takes a long time. In the meantime, you have

mortgage

interest

insurance

upkeep

HOA?

Here in Denver, HOAs take care of insurance on the outer part of the house for condos and townhomes, ie roof, walls, etc. So, you may only need to get "renter's insurance" to cover the insides and your belongings.

Upkeep can be really expensive. Plumbers, hot water heaters, dishwashers, carpet, paint, etc. You'd probably want to be able to save at least $100 a month just for future upkeep, maintenance, and repair. A roof will wear out, and replacing one every 20-30 years can run ya $10K easily. Painting the exterior every 6 years will run ya at least one to two K, depending on the size of the house.

So, after you figure your mortgage payment (after subtracting your AVERAGE tax deduction), add the insurance/HOA fees and upkeep. Lastly, subract the actual equity you'd build up each month. Is this number worth owning instead of renting?

Example.

$1500 monthly (of which $1300 is interest, $200 principle)

$100 upkeep savings

$100 taxes (after tax deduction)

$100 insurance/HOA

-$400 approx tax savings from interest paid, assuming 25% + 5% state)

-$200 equity

$1200/mo to own.

Just remember, that figure is based on the beginning of the mortgage, when you are paying the most interest you ever will. Every month, your interest paid will be slightly less and your equity gained will be slightly more. So, you won't have that big tax break in several years, but the equity will grow more rapidly.

So, it may only be effectively $1200/mo now, but toward the end of your loan, you may be paying closer to $1500/mo effectively, without the tax deduction.

One last thing... consider how long you'll be in your home. Selling your home through a broker will probably cost you 10%, regardless of how much equity you have built up. So, if you have a $200K home and in 7 years it's worth $250K, you may only have $30K in equity built up, but it'll cost ya $25K in commission to sell it, not to mention (I think) the IRS will want their share of the appreciation of your home. Real estate appreciation/depreciation tax laws are confusing.

What I'm saying is... make darn sure you'll be there for a while cause it'll cost you BIG TIME if you end up selling sooner than later.

[firstsource]

If you qualify for the loan program with assets/income/job history etc the scores are workable for an 80/20 mortgage. Rates could be a bit higher than if you had a 640 mid score, but you should be able to get the loan.

Charles