(Closed) Starting gathering info re: buying – credit issues

posted 6 years ago in Home
Post # 3
Member
2866 posts
Sugar bee
  • Wedding: June 2014

Depending on your SO’s credit score it might not be as big of a hurdle as you think. A good idea would be talking to a lender that you may have a relationship with to see where you stand. They are going to be happy to tell you where you need to be and how to get there, i really encourage you to do so. You may not be as far from your goal as you think 🙂

Post # 5
Member
13099 posts
Honey Beekeeper
  • Wedding: July 2010

I’d talk to a mortgage broker / lender and see where you ultimately stand.  Depending on his credit score, you may be able to qualify for what you’d need now.  And if you can’t, the lender could probably recommend things you can do/change to try to help you reach that point.

The biggest thing I can see would be to pay off your credit card debt as aggressivly as you can.  If you can get that “bad” debt lower, it should help your ability to get a loan.

Post # 6
Member
6661 posts
Bee Keeper
  • Wedding: May 2010

When we took out a loan, 685 was a ‘magic’ number that we had to be above in order to qualify for better interest rates and no closing costs. Luckily both of us were, we are both in the 750 range. But I never got the impression that we wouldn’t ahve gotten the loan with lower scores, so you might be okay.

The main thing the bank wanted reassurance of was that we would make our payments. So in addition to pulling our credit, they spoke to our previous landlords and requried rent payment history of over two years with copies of the cashed checks. So if your payment history is good on your credit score that should help you more than anything.

Post # 9
Member
1048 posts
Bumble bee
  • Wedding: June 2011

You should be able to qualify for an FHA loan with a minimum 3.5% down which is allowed to be gifted from family.  The only concern would be your debt-to-income ratio.  The best thing you can do is speak with a lender and find out if you can qualify and how much your approval would be.  Then take that approval number and determine how much YOU can really afford.  

Post # 10
Member
4419 posts
Honey bee
  • Wedding: December 2010

I think it’s important to note that a credit score is not an indicator of whether you’re fiscally responsible. It’s an indicator of how good you are at being in debt. 

I pay all my bills on time. I don’t have any credit cards.  I had three student loans, one of which I paid off last year.  I paid off my car, so I don’t have car loan.  I haven’t had mortage in six years, because I sold my house and moved into an apartment when I couldn’t afford the mortgage payments. But I still only have a credit score of 601… Why is it so low? Because I don’t have any debt except student loans. The credit bureau recommended that I get a credit card to increase my score!  I’m penalized as far as a credit score because I’ve been responsible and have saved up and paid cash for everything rather than going into debt.

I’ll probably never have a good credit score, because Darling Husband and I believe in paying cash.  When we buy a new house, we’ll sell this one (which is paid for–no mortage) and then pay cash a new one. At most we’ll mortage $20K and pay that off in five years.  We plan on paying cash for our vehicles…  DH does have credit cards, and he has an excellent credit score, but he never carries a balance on his cards because he doesn’t believe in paying interest…

Good luck in getting a house!!!!  Don’t let the credit score thing get you down.  There are ways to get around that!!!

Post # 12
Member
2866 posts
Sugar bee
  • Wedding: June 2014

Woo hoo! I admit I keep checking this thread for updates, it makes me so happy to read about people being usure where they stand and finding out the dream of homeownership is within their reach 🙂 

Post # 13
Member
1175 posts
Bumble bee
  • Wedding: June 2011

@MsYankee:  I am a lender in Canada, so I’m not sure if it’s much different from the States, but I wouldn’t worry about your credit score at all.  We primarily use TransUnion and I would only start to question things when the score falls below 600.  That being said, we do look at the amount of credit card debt you are carrying.  We might ask why there is that much and why you didn’t get a student loan instead of using a high interest rate credit card but we definitely make an effort to be reasonable and understand the various personal decisions that you might have to make.

We also look at past repayment and if you’ve always been on time, that’s a good indicator that you will continue to honour your payments in the future. 

And then we also ensure that you qualify for the mortgage payment based on your incomes and make sure that it falls within our guidelines for debt servicing.  I did a quick calculation based on the numbers you gave for income and loans and I think you should be within the guidelines to qualify for the $120K purchase price, especially if you have the gifted downpayment.  Good luck!

Post # 14
Member
13014 posts
Honey Beekeeper
  • Wedding: November 1999

I just met with a mortage broker the other day, and learned about how credit scores affect your mortgages:

– When you both sign the mortgage, they will take the lower of the two middle scores to calculate the rate (so, if your scores are 614, 615, and 616, and FIs scores are 620, 621, and 622, they’d use 615). 
– The lower the score they use, the higher your interest rate is going to be.  740 is the ideal “gold standard,” below 600 makes things really tricky. 

As for credit cards:
– It becomes a hit to your credit score when you use more than 50% of your credit line.  It’s better to have a$10,000 balance on a $20,000 credit limit card than it is to have a $900 balance on a card wi th a limit of $1,000. 

Your best bet is to meet with a broker or lender, have them compare your asset/liabilities and credit scores, and let you know what you can approximately afford.

Post # 15
Member
2815 posts
Sugar bee
  • Wedding: March 2012

I’d mostly be concerned with your debt to income ratio.  When we were applying for our mortgage, we were told that anything over 45% isn’t good.  It might depend on the type of loan you are trying to get though.  How much of your monthly income is used to pay debts?  That’s how you figure out your ratio.

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