Advice on credit situation/home loan?
Here is my situation, my husband and I really need to purchase a home.
Earlier this year I checked my credit report because I knew there would be old accounts that needed mending. I pulled my score it was just under 600. I paid off everything in collections, consolidated my student loans. I just have student loans, no other auto loan, credit card or any other open debt. My husband on the other hand has a handful of pretty old debt as well, stemming from his previous marriage. His score is at 545, mine got bumped up to 625 and its only been a couple months, some more updates should go through as well.
Anyways we currently have $10,000 in savings from an inheritance. We also are set to receive approximately $45,000 more in august.
I talked to the banker and he said with the credit scores so low there is nothing that can be done at this point. If we can get the credit score up by august, then the bank might possibly be able to offer an adjustable loan with 20% down. We can then refinance at a later date for fixed rate after our credit goes up some more. He did say that with lower scores there will be high fees associated with a loan. His other suggestion was just to work on the credit scores, and wait a year and then reapply for a loan, where we would qualify for 30 yr fixed with lower fees.
But we literally are desperate for a house we have 4 kids, I need to work from home as soon as I can and we have no space to do it. Our lease ends in august so we probably won’t get the rest of the inheritance by then to get an adjustable loan. We could probably work with our landlord on renting a shortened lease but it’s hard to know.
What do you think is the best thing we could do? 1)use some of the $10,000 to pay of my husbands old debt *in hopes* it will bring his credit score up enough to 620 (possibly open a credit card in his name in the mean time to help with that, 2) try to get his score up somewhat and go for the adjustable mortgage with the 20% down payment (looking at $140,000) house, or 3)wait another whole year to buy a house even though it will be pretty unbearable! but the interests rates will probably climb and id ont’ know how much I will actually save in fees by waiting a whole year if interests rates are climbing anyways.
Please your advice
Thanks can you share some advice on negotiating the collections? they area ll very old, nearly 7 years! i was under the impression they fall off after 7 years and we are literally just about 7 years (in a couple months)
thank you there are no judgements against him, just in collections. we make about $56,000 a year
- loanmasteroneLv 77 years agoFavorite Answer
In order to refinance your house after your purchase you must have equity in the property. In today's real estate situation your house would not appreciate in a short time for you to refinance in 4-5 years, if you accepted an adjustable rate loan at this time.
You are apparently applying for a conventional mortgage loan. This might not be the mortgage loan you would want to apply for at this time.
It might be to your benefit to apply for an FHA mortgage loan. The criteria is not as stringent as applying for a conventional mortgage loan. If one of you were in the U.S. military it might be to your benefit to apply for a VA mortgage loan, as credit scores are not used to approve your mortgage loan.
You would need to check with a mortgage lender that is authorized to do FHA mortgage loans. In applying for a mortgage loan your credit scores could be in the upper 500's to be approved for a mortgage loan. Normally FHA mortgage loans are approved for 30 years. The down payment on most FHA mortgage loans is around 3.5%
Your interest rate would be based primarily on the middle credit score of the highest wage earner between you and your husband. Past credit history is considere, however, it might be that you would need to write a letter of explanation as to why you had past financial difficulties. Most financial probmes occur because one or both lost a job, or had medical problems.
In applying for a FHA mortgage loan, your mortgage loan officer would be in a position of telling you what you would need to improve your ability to obtain approval. He might also be able to refer you to someone that might help in hasting the process that would assist you in your purchase of a house.
I hope this been of some benefit to you,good luck.
- A HunchLv 77 years ago
The current US prime loan rate has stayed the same since Dec 16, 2008. It's doubtful that it will rise much, if at all in a year.
But housing in many areas are increasing. To purchase a $140,000 home, you are going to need about $45000 in annual income.
- for your husband to get a loan with his income considered, he will need a credit score of around 600, even with 20% down. That's a pretty hefty jump in 4 months. I don't see it happening.
Additionally, if any of these old debts have judgements against him, although the debt is no longer on the credit report, the money is still collectible and he might not be able to get a loan due to his debt to income.
Just some things to think about...
- Go with the flowLv 77 years ago
Husband needs to make sure everything on his credit reports that is in collections shows $0/ PAID/ Settled.
Again, get a book on credit repair (easy read), or ask here how to negotiate settlements.
I have seen people settle for 1/2 of what they owe.
Try not to trust banks. ARM mortgages are a bad deal. Get fixed rate.
(people trusting banks is what got us into this foreclosure mess).
You can't even get a 20% down mortgage if either of you have collection items.
This NEEDS to be cleared up.
Wait the year if you have to.
Interest rates will stay steady for about the next 2 years (opinion).
Please understand. Anything in collections needs to show $0/PAID for any mortgage.
- SlickterpLv 77 years ago
1. You don't want an adjustable loan. Period. You are worried rates will go up, and justifiably, they are at record lows. Not much of anywhere to go but up, so if you have an Adjustable, you see the problem there.
2. Wait it out until credit improves. You don't NEED to buy, you WANT to buy. DOn't rush into it, you will regret it forever.
3. See if you can negotiate pay for delete with the creditors he has. Get the deals in wirting. Offer whatever you need to, the delete will be MUCH better for his credit than just paying it off.
If they are that close to 7 years, let them drop off.