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Am I really going to have to settle for 9%?


SweetDreamer
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My husband and I just paid off our debt, with the exception of a repo that will fall of my history next year. Our scores are both in the low 600 (one of his is about 590). We want to purchase our first home, but according to what DH has read at work (He works for Fidelity Investments) that if our scores are under 650 to be prepared to not be approved for anything less than 8 and 9%. Is this true? Is there any way we can get a lower rate? We expected to probably get 7%, but anything more than that we will not be able to afford a home big enough for our family.

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Hi Sweet Dreamer. I'm not sure what kind of debt you have on your CR to make your scores low. I would def. work on getting those cleared up.

There are some programs that work with you on mortgages like FHA and VA that aren't all the way score driven. But it still helps to have higher scores that way you have more options when buying a house. Having more options......gives you the upper hand on deal making!!!!!IMO

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The only thing on my credit is the car repo from 2002, although they did report it twice under two variations of the company name. I was able to get one removed. I did have a late phone bill from when I moved in 2002. I had assumed that I had paid it completely, but there was still a small balance (under $70), that I wasn't aware of until I pulled my credit report a few months ago. Other than that my record is good. But, I don't have any credit cards, and lots of student loans that have not come due yet since I'm still in school full-time. My scores have jumped 10 points in the last 6 weeks, and I expect them to continue from here on out.

My husband, however, took out several thousand dollars of small business loans and tried starting his own business while still working full-time with another company. His company filled bankruptcy and my husband had to work several temp jobs just to pay the necessities. Mean while his business bombed and he was left with over $26,000 in debt. That was in 2004. Today he has paid them all off, but, because of the many, many, many days late, his credit score is really bad. His one saving grace is his 2 credit cards that he has been current on payments, hasn't maxed out or gone over limit, and has had one of them for 10 years, the other for about 5. We are hoping that his good record with them is enough to start boosting his numbers, but so far there hasn't been a change.

So, there is our credit history in a nut shell. With what my husband makes we could kind of afford 9%, but would have to settle on a smaller home. We would obviously like to have a smaller percentage rate and get a little bit bigger home (we have 4 kids with 1 on the way). I have thought of getting a credit card myself, but I understand that will initially lower my score, something I do not want to do. The other option, which we will begin next month, is pay on some of my student loans, even though they are not due yet.

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You should talk with someone about FHA or some other type. If you can't get it, atleast they will let you know where to start and what to do to improve your chances.

I know most mortgage lenders will want to see atleast one year of on time payments....which includes cc, utilities, and rent (or atleast mine did) It will always look better if he brings or keeps the balance way down on his 2 good cards.

You can always start by disputing some of his lates and see if you can get them removed or asking for goodwill.

If you have no credit...I don't see where getting some credit would hurt you. I got a Crown Jewerlers card......charged a little.....pay a little to keep the tradeline open. I also got a Orchard and charged $22 bucks. I pay it in full each month and charge a small amount again.

Just my 2cents.

Good luck with the baby!

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I'm a loan officer in New York. Jetscarbie's suggestion about an FHA loan is good.

On these type of loans, the interest rate is between 6.5% to 7.25%. Depending on your LTV ratio, there can be mortgage insurance. The best thing about these types of loans, people with low credit scores can qualify.

Can only go full doc - meaning your need to provide two years of working in the same line of work. Your debt to income ratio has to be no more then 50%. Also any major lates will have to be explain (hand written letter).

See you are in Utah - you should try to contact member "Firstsource" (Charles), he is a good mortgage broker for your state.

Good Luck.......

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check out www.naca.com

they're not for everyone, but depending on the price of the house, you can't beat their rate - currently at 5.75% 30year fixed 100% financing with no closing costs, no money down - just the cost of a couple of credit reports.

If they're in your area, it's worth your time to at least check out a seminar.

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I'm a loan officer in New York. Jetscarbie's suggestion about an FHA loan is good.

On these type of loans, the interest rate is between 6.5% to 7.25%. Depending on your LTV ratio, there can be mortgage insurance. The best thing about these types of loans, people with low credit scores can qualify.

Can only go full doc - meaning your need to provide two years of working in the same line of work. Your debt to income ratio has to be no more then 50%. Also any major lates will have to be explain (hand written letter).

See you are in Utah - you should try to contact member "Firstsource" (Charles), he is a good mortgage broker for your state.

Good Luck.......

Very good advice! I say that because I was just approved today!!! I got a FHA loan, 6.125%, 30 year-fixed on a home that is $202k. FHA is/was not score driven at all. My scores are 580, 600 and 583. My LO is wonderful. The problem/drama that I had was that I am currently in a lease to own home and I'll be breaking the lease--I have 4 more months to go so you know eventually the landlord will want the balance of the lease. Well, my realtor will be paying my lease for 3 months, and on that last month, I'll get the landlord to apply my deposit or I'll pay him in increments. This works out really good so I won't have 2 "mortgage" payments at the same time! Tomorrow, we pick out our carpet color, cabinets, etc. THIS IS SO EXCITING!!!

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.... 6.125%, 30 year-fixed ....$202k.

Sounds good - your new payment (not including escrows) = $1227 per month.

Stay in contact with your broker as you get to your closing date. Mention you want to know all charges before closing, that way there's no surprises.

Seems like a great deal - good luck....:)

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Very good advice! I say that because I was just approved today!!! I got a FHA loan, 6.125%, 30 year-fixed on a home that is $202k. FHA is/was not score driven at all. My scores are 580, 600 and 583. My LO is wonderful. The problem/drama that I had was that I am currently in a lease to own home and I'll be breaking the lease--I have 4 more months to go so you know eventually the landlord will want the balance of the lease. Well, my realtor will be paying my lease for 3 months, and on that last month, I'll get the landlord to apply my deposit or I'll pay him in increments. This works out really good so I won't have 2 "mortgage" payments at the same time! Tomorrow, we pick out our carpet color, cabinets, etc. THIS IS SO EXCITING!!!

Sweet. What state are you in?

Eddie

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Thank you all for your suggestions. We talked with a mortgage broker that our Realtor friend suggested. This guy was able to help my husband by doing a rapid rescore which brought up his scores to around 629 (all three scores). The broker did charge a small fee and since I'm not working yet we decided to just pay for the one scoring help and just have DH on the loan with both of us on the title. I'll work on my own score over time and then be added at a later date to the mortgage.

We picked out our home today, and are waiting for the reply from the owner as to whether or not they have accepted out offer. We were approved for an FHA loan, and a UHA loan. Our interest rate is under 6%, and our broker already has started the paper work for the various gift/grant programs to help with our closing cost and down (even though we already have that all set aside). Our payments, with all taxes and insurance, will be under $1300 for a beautiful 5 bedroom, 2 bath home.

Thank you all again for the great advice and help!

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I'd like to weigh in and say that is a smoking rate. FHA is an amazing loan product, as well as the CalFHA, MyCommunity and the various downpayment assistance programs I use. I have a tried and proven theory that the more time I spend finding and qualifying my client for esoteric loans and grants the more referrals i get. period.

Now, one caveat. Bank of America and Citibank both offer an insane, government-subsidized loan called ACORN. I am a broker with a substantial amount of experience so believe me when I say it is the best thing going right now, rate-wise. It's only available in a retail branch and not to brokers though. It is seriously worth your time to check it out.

http://acornhousing.org/TEXT/homebuying1.php

Oh and their approach to "bad" credit is just like FHA, not so much an issue.

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