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Focusing on improving my credit for a home down the road??


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Im in a really good position financially after years of making barely enough to get by. I know its hard but I wanna shoot for getting into a home in the next two years maybe three. I'am currently working on stashing away as much cash as possible for a down payment.

 

Now onto the bad..filed for bankruptcy about 4 years ago due to falling majorly behind with credit cards (my own stupidity). Credit Karma says I have 605 which I know doesn't really hold much weight with a real score. I tried to obtain a car loan a few months ago and they said my score was like a 550 I think they used equifax and I never took the loan because the interest rate kinda sucked. I wanna say I already ran my free yearly credit report in January so I wont know my exact score for sure. 

 

I have one credit card with a $300 limit that ive had for a few years now and have good standings with. Not sure if I should apply for another one or ask for a credit increase (not sure if that will help my credit)

 

Im not sure how screwed I am with the bankruptcy for a 1st time home buyer for pre approval but I guess if I should wait out the full 7 years to have the bankruptcy not show up then that's what i'll do. 

 

So asides from keeping my CC balance low and paying off my medical debts what would you guys recommend to improve my odds of getting pre approved for a home??

 

Thanks guys and girls !

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First...the bad news...the BK will stay on your reports for 10 yrs, although the traddelines (TLs) included in bankruptcy (IIB) will fall off at 7 yrs.  You might be able to dispute the BK at that time...but it doesn't always work.

 

Now, the good news.  Your FICO Mortgage Score depends more on NOT having open accounts over which you might get sued (i.e., credit cards) than the score you get to see thru places like credit karma (which are FAKOs, BTW).  If you have 10-20% down, and your medical bills are handled, you might be able to get a mortgage NOW.  We used a good mortgage broker 3 yrs post BK 7, and got a mortgage with essentially nothing down in 2008.  We did have to pay a higher interest rate, and PMI, but we got a house.  Times have changed, but you just might qualify....

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First...the bad news...the BK will stay on your reports for 10 yrs, although the traddelines (TLs) included in bankruptcy (IIB) will fall off at 7 yrs.  You might be able to dispute the BK at that time...but it doesn't always work.

 

Now, the good news.  Your FICO Mortgage Score depends more on NOT having open accounts over which you might get sued (i.e., credit cards) than the score you get to see thru places like credit karma (which are FAKOs, BTW).  If you have 10-20% down, and your medical bills are handled, you might be able to get a mortgage NOW.  We used a good mortgage broker 3 yrs post BK 7, and got a mortgage with essentially nothing down in 2008.  We did have to pay a higher interest rate, and PMI, but we got a house.  Times have changed, but you just might qualify....

 

As far as the BK on my record for 10 years it sucks but if I can still pull off a mortage down the road it dont really matter to me. 

 

As of right now I have nothing except the one credit card and thats it. So would it be wiser to keep my debt to income ratio as low as possible? Id rather have it this way anyways in case down the road something happens and I need cash for an emergency rather than a big car payment. Yah I know credit karma is not accurate..I use it to see if anything improves or worsens rather than focus on the fako score. I was thinking 10 % down on whatever if possible and keep a stash just in case something needed repairs on the house. Im aware of the PMI but isnt there tricks to get rid of it quicker like raising the value of your house???

 

Also am I disqualified from the good mortgage's with having the BK? Like an FHA?

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As of right now I have nothing except the one credit card and thats it. So would it be wiser to keep my debt to income ratio as low as possible? Id rather have it this way anyways in case down the road something happens and I need cash for an emergency rather than a big car payment.  I was thinking 10 % down on whatever if possible and keep a stash just in case something needed repairs on the house. Im aware of the PMI but isnt there tricks to get rid of it quicker like raising the value of your house???

 

Also am I disqualified from the good mortgage's with having the BK? Like an FHA?

 

Don't sweat your DTI too much right now.  Traditional credit requires 3 tradelines, so you should consider opening a couple more.  (Just for the record, I am not specifically advocating taking on debt; however, if you want to obtain a mortgage, that is what it often takes.)

 

PMI goes off the loan-to-value ratio of your house at the time of purchase.  To take advantage of things like raising the value, you would have to refinance.  However, an 80/20 mortgage situation might work.  You basically finance two separate transactions, but the larger one takes you to 80% or less, so you cheat the PMI.  A mortgage broker could help you figure out if this is good.

 

FHAs aren't always good mortgages.  They can be, but don't just assume that if you don't get it, its because what you are getting is a "bad" loan.  Also, most of them just want the bankruptcy to be satisfied at least 2 years prior to funding.  You should be good.

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Don't sweat your DTI too much right now.  Traditional credit requires 3 tradelines, so you should consider opening a couple more.  (Just for the record, I am not specifically advocating taking on debt; however, if you want to obtain a mortgage, that is what it often takes.)

 

PMI goes off the loan-to-value ratio of your house at the time of purchase.  To take advantage of things like raising the value, you would have to refinance.  However, an 80/20 mortgage situation might work.  You basically finance two separate transactions, but the larger one takes you to 80% or less, so you cheat the PMI.  A mortgage broker could help you figure out if this is good.

 

FHAs aren't always good mortgages.  They can be, but don't just assume that if you don't get it, its because what you are getting is a "bad" loan.  Also, most of them just want the bankruptcy to be satisfied at least 2 years prior to funding.  You should be good.

 I didnt know for sure if FHA was everyone's go to loan but it seemed like it. Hey if I got approved for something else with less than 20% down id be happy. Truthfully finding a home in CT for "cheap" that isnt a total money pit is pretty tough but its possible in my area for maybe like 140-160k will get you something decent. Me and my wife can manage that and still have some cash left-over at the end of the month.

 

 Also we wanted to keep everything in my name will that cause any kind of issue to the banks? I make salary so my wages never change. I know getting the full 20% is the right way way to do it but for me to scape up that much I might as well just stay living in my apartment. So if im reading this right you CAN do a fixed rate with less than 20% down??

 

And would you advise maybe trying to open up another line of credit somewhere?

 

 

 

As I understand it, PMI hangs around until you have a certain amount of equity...not real sure about that.

 

FHA, with a down payment, should be possible.  But, I would expect them to add maybe 2 points to the interest rate.

 

Im guessing 2 points could make a good size difference in my monthly payments?

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Don't get me wrong, FHA loans are good loans.  With that said, some sellers will not sell to someone securing FHA financing.  The reasoning is that closing an FHA loan is more cumbersome than a conventional.  Under FHA, there are a lot of rules about the condition of the premises.  If your looking at cheap, FHA may not be the way to go.

 

Take me, for example.  I own two houses.  I am remodeling both.  If I decided to sell one at this point, the better-conditioned one would qualify for conventional financing, but would not pass the FHA inspection process.  I have a light fixture that has one non-working light socket in.  So, there are 5 there, but one doesn't work.  (My kids...need I say more?) Because I cannot put a light bulb in that and make it work, I would have to replace the fixture.  Unfortunately, because of the age of the house and some other issues with the lathe and plaster where the fixture is installed, its not a simple project.  To do the work out of pocket, I would estimate a cost of $250. 

 

On a conventional mortgage, I could disclose that it doesn't work, and its the buyer's problem.  If you are thinking you will buy an older house or a "fixer-upper", FHA is not the best option.  Same with foreclosed properties and short sales. 

 

As for getting it in just your name, that's not an issue.  It happens all the time.  She will have to sign some things saying she agrees.

 

And you absolutely can get a fixed rate with less than 20% down.  You might check out Zillow's "Get custom quotes." Its anonymous, but gives you an idea of what you qualify for.

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Don't get me wrong, FHA loans are good loans.  With that said, some sellers will not sell to someone securing FHA financing.  The reasoning is that closing an FHA loan is more cumbersome than a conventional.  Under FHA, there are a lot of rules about the condition of the premises.  If your looking at cheap, FHA may not be the way to go.

 

Take me, for example.  I own two houses.  I am remodeling both.  If I decided to sell one at this point, the better-conditioned one would qualify for conventional financing, but would not pass the FHA inspection process.  I have a light fixture that has one non-working light socket in.  So, there are 5 there, but one doesn't work.  (My kids...need I say more?) Because I cannot put a light bulb in that and make it work, I would have to replace the fixture.  Unfortunately, because of the age of the house and some other issues with the lathe and plaster where the fixture is installed, its not a simple project.  To do the work out of pocket, I would estimate a cost of $250. 

 

On a conventional mortgage, I could disclose that it doesn't work, and its the buyer's problem.  If you are thinking you will buy an older house or a "fixer-upper", FHA is not the best option.  Same with foreclosed properties and short sales. 

 

As for getting it in just your name, that's not an issue.  It happens all the time.  She will have to sign some things saying she agrees.

 

And you absolutely can get a fixed rate with less than 20% down.  You might check out Zillow's "Get custom quotes." Its anonymous, but gives you an idea of what you qualify for.

 

So basically in a nutshell FHA only approves liveable conditions it's kinda like renting a apartment for section 8 where it has to meet certain requirements so the tenant doesn't have a potential POS for a living space??

 

I wouldn't mind a semi fixer upper within reason..I have plenty of resources with construction and what not but I don't want something I cant move into right away you know. 

 

Just read this somewhere not sure if its true or not??

 

"Only real advantage to go with FHA is the lower credit score requirements and they will approve higher debt to income ratios."

 

By the way thanks to everyone responding and educating me on this stuff. 

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So basically in a nutshell FHA only approves liveable conditions it's kinda like renting a apartment for section 8 where it has to meet certain requirements so the tenant doesn't have a potential POS for a living space??

 

I wouldn't mind a semi fixer upper within reason..I have plenty of resources with construction and what not but I don't want something I cant move into right away you know. 

 

Just read this somewhere not sure if its true or not??

 

"Only real advantage to go with FHA is the lower credit score requirements and they will approve higher debt to income ratios."

 

By the way thanks to everyone responding and educating me on this stuff. 

 

Bingo!  That's it in a nutshell.  620 is the target for conventional financing.

 

You DTI is great.  Don't worry about that part right now.  We can help you with credit, but if you are serious about finding something, start browsing the Zillow advice boards too.  You'll learn quite a bit about what's "normal" and what's not.

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Bingo!  That's it in a nutshell.  620 is the target for conventional financing.

 

You DTI is great.  Don't worry about that part right now.  We can help you with credit, but if you are serious about finding something, start browsing the Zillow advice boards too.  You'll learn quite a bit about what's "normal" and what's not.

Oh shoot I totally forgot about my stupid student loans..but its like $2000 or $3000 left on it with like $50 a month payments but asides from this and my puny credit card thats it. Other than utilites and rent I have no other expensive's and as of now im making 50k a year.

 

Not gonna lie you guys are giving me some hope for the future lol.

 

Quick question for monitoring your credit asides from credit karma..what is everyone on here doing to keep an eye on your score and what not? I understand im going to have to pay a fee which is fine to do it but seems like there is a ton of company's offering this service but im not sure which ones are good and legit??

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You have student loans?  GREAT!! You have an installment debt!  That looks good.  (Lenders don't care if its a car or a student loan...installment debts all look the same.)

 

Now I'm gonna put the breaks on.  Read this very carefully, then read it again.  I believe you could qualify for a mortgage now.  You will probably not get the best rate, but it is a possibility.  With that said, the mortgage industry is doing some crazy things right now.  Stated income loans are back and appraisal values are SOARING.  Rates have climbed in just a few weeks.  If you decide to look into doing this sooner than a year or two, WATCH YOUR BROKER CAREFULLY!  If they don't return phone calls for a week, walk.  If they give you a funny feeling, walk.  If you don't like their hair, walk.  When the market gets unstable like this, brokers benefit.  The downside is that they aren't going to take a guy like you as seriously.  They want the payoff, and may not do things perfectly for you.

 

On the other hand, the right broker would be a huge benefit, explaining the products you qualify for and helping you understand what you need to do between applying and closing to make sure everything goes smoothly.  Rates are going up right now and this will probably continue for the forseeable future.  Keep that in mind.  I love using the Zillow quote tool.  It lets me know who likes my numbers and who doesn't.

 

As for the score, myFico is pretty good.

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You have student loans?  GREAT!! You have an installment debt!  That looks good.  (Lenders don't care if its a car or a student loan...installment debts all look the same.)

 

Now I'm gonna put the breaks on.  Read this very carefully, then read it again.  I believe you could qualify for a mortgage now.  You will probably not get the best rate, but it is a possibility.  With that said, the mortgage industry is doing some crazy things right now.  Stated income loans are back and appraisal values are SOARING.  Rates have climbed in just a few weeks.  If you decide to look into doing this sooner than a year or two, WATCH YOUR BROKER CAREFULLY!  If they don't return phone calls for a week, walk.  If they give you a funny feeling, walk.  If you don't like their hair, walk.  When the market gets unstable like this, brokers benefit.  The downside is that they aren't going to take a guy like you as seriously.  They want the payoff, and may not do things perfectly for you.

 

On the other hand, the right broker would be a huge benefit, explaining the products you qualify for and helping you understand what you need to do between applying and closing to make sure everything goes smoothly.  Rates are going up right now and this will probably continue for the forseeable future.  Keep that in mind.  I love using the Zillow quote tool.  It lets me know who likes my numbers and who doesn't.

 

As for the score, myFico is pretty good.

Thats great to hear but I wont have enough money in the bank for at least a year but a year isn't that long to be honest. Its not like i'm in a terrible living situation where I have to get out next month or even in a few months. Ive got a very close friend whos mother owns a realty and im not saying they're gonna give me some mega hookup but I wont be taken for a ride with them and im sure she knows some good places to work with for financing. I gotta hold off until I got money in the bank for a DP and also backup cash incase of something terrible happening like idk I need a roof/hot water heater/septic/oil furnance...luckily I know people who do HVAC, home construction, plumbing, electrical not id expect them to work for free but I wont be taken for a ride either from them. 

 

Im gonna check out Myfico for a closer more accurate score and get to knocking my stupid little medical debt out.

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