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     | Wednesday, November 29, 2000 - 09:07 am  First off Christine I found your article about boosting your scores very informative  My husband and I will be purchasing our first home next September, We of course got our scores and reports to see where we stood, his were fair his middle score being 626, mine were not my middle score being 540. At the time of the reports we had 12 open accounts and a ratio of 85% ouch, since then I have paid off and closed 5 accounts, we have also gained 2 accounts with high limits, one I tranferred some balances but the balances are still low. So as of now our ratio is around 58% which I am happy with since I just started this quest in October. the only negative I had was a 30 day late which is being removed, he has a collection which I am still try to work for a deletion. Now I still want to get these balances down alot more and hopefully get are ratios to around 38%. I have been closing retail cards about once a month but I have heard that you should atleast keep one retail card. Do you think this will up our scores significantly by the end of the summer?? I would appreciate any input and if there is something wrong or right about what I am doing please let me know. Thanks a bunch
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| | Wednesday, November 29, 2000 - 04:25 pm Annmarie, A couple of questions. 1) When your talking ratios are your referring to "relation of high credit to amount owed" or are your talk "relation of expenses to income"? 2) Do you both work and if so who is the major bread winner? 3) Why are you waiting until Sept. to purchase? From your info above it sounds like you could do an FHA loan for 97%? As for some imput above, paying off the accounts is a good idea. However, don't close out all of your accounts except the new ones. Yes I would close out some of the retail once you don't use but keep the oldest one. Get rid of and close any Finance company accounts. The 30 day and collection account if recent are probably hurting your score the most.
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| | Wednesday, November 29, 2000 - 07:03 pm Thanks, the ratios is high credit to balances not expenses. My husband is the bread winner. The reason we are waiting it b/c first I want to get down some debts before I take on a mortgage and secondly he switched jobs last Nov99 and gets overtime every week, I was told by many lenders that he would need atleast 18 months of consecutive overtime in order to use it for income. I am keeping 2 of my oldest accounts open and some new and dumping all the little ones. My 30 day is going to be removed the are just s l o w in correcting it grr. his collections is from "95" from a former utility company.
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| | Friday, December 01, 2000 - 04:11 am Though the lender is correct with the overtime, I don't think you should use it to qulaify. If you have to use it to qualify you're probably buying to much home. The reason i personally don't like to use it with people is that what happens if it stops or is cut back. Then you could be overextened. Use the overtime for building a savings reserve not for just getting by and making the house payment. His switching of jobs otherwise should create no problems if it was in a somewhat related field. The collection is old and will either need to removed or paid but has minimal impact on underwriting. As for waiting, gnereally don't agree with this idea. When you purchase a home you can use the tax deductability to help you reduce your other debt. If you current rent is say $600 and you're planning on going to a $700 home payment you will come out ahead due the the deductiosn allowed by the IRS for the interest and property taxes. One other reason I don't like to see people wait is they may end up paying more for a home as the price could go up or interest rate could also begin to rise by then(though I think were going to see a decrease in the 1st q of 01). In either case based on the above, you still could qualify for and FHA loan with as little as 3% down or even be able to do it with 0 down.
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| | Friday, December 01, 2000 - 04:38 am Thanks again for for reply. I realize what you are saying about the overtime. When he swtiched jobs it was to a different field and his days have always been 10 hours a day 5 days a week, with this I now stay home with the children. If we went with his base salary we probably could still qualify for our price range I believe but I would have to look over those figures. I would love to pruchase now if we could but I don't have much saved for downpayment and I don't think our scores are high enough for 0% down. Thank you so much for explaining this all to me, I really appreciate it and I will try to look over figures with overtime and see what I come up with.
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| | Friday, December 01, 2000 - 04:58 am I just wanted to add, even though we would qualify for much higher with his overtime, I don't plan on going for that much b/c of your reasoning, but without it we would only qualify for a house around 49K, with overtime around 96k which I would never do. The houses we have been looking at range from 55-60K, so I would need some of the overtime to get it. And if his overtime ever stopped I would then work more at my job. But I do realize I can't count on it that why I would never go for that much, but I do need a little bit to qualify for what we would like.
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| | Friday, December 01, 2000 - 03:06 pm If you husband switch jobs w/in the lat 12 month, his overtime will not be counted. You numbers sound strange as your husbands overtime would need to be as much as his regualr pay. Also, in that price range you can most certainly do an FHA loan. FHA does not use credit scores. Thus you only need 3% down. Tie this in with a GIFT from Ameridream http://www.ameridream.org or one of the other charities that will donate you Downpayment and you only need Closing cost. However, structure the deal right and the seller can pay these and WALA. A no Down no CC deal. Doesn't alway quite work out this way but you could proabably get pretty close, maybe $300-500. If you want more info feel free to send me an email at dsemler@metloan.net or post back here.
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| | Wednesday, February 28, 2001 - 05:38 pm how can i get a home with FICO scores in low 500's i will have 25,000 to put down in 45-60 days
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| | Thursday, March 01, 2001 - 05:37 am Getting the mortgage won't be the hard part. The hard part will be when you realize that, if you would have cleaned up your credit reports, you would have a much better loan (lower interest rate, less down payment required, etc.). I read your other post stating that your 1991 BK "doesn't show as discharged". This is 2001 - that's nearly ten years since (worst case) discharge of your BK (assuming Chapter 7). This should be now (or soon) completely off of your credit reports. Is ALL of the information on your reports (all three of them) ACCURATE? If not, that's what's driving your scores to low 500's. Why pay high interest and a high down payment just because your credit history is inaccurate (which makes your scores lower)?? I suggest you get copies of each of your reports (Experian, Equifax and Trans Union) and either post back here with questions on how to clean up the items.
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| | Thursday, March 01, 2001 - 04:32 pm Helen, You never mentioned what price house you were looking at. To give you an example, I am doing a loan for a lady right now with scores or 501,501,497. Open Collections, though small. Her LTV is 66%. She is puttign down about 30k and she is going with an FHA loan. This loan was approved through FHA's automated underwriting. She will end up with a rate of about of 7.5. I preach about FHA loan a lot but it never ammazes me the people that get approved.
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| | Thursday, March 01, 2001 - 06:23 pm That's amazing!
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| | Thursday, March 01, 2001 - 06:26 pm I was looking at homes up to 85,500 I was told I wouldn't qualify for FHA
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| | Saturday, March 03, 2001 - 06:47 pm why were you told it wouldn't work FHA? Sound more like the broker you asked is not set up with FHA. I see this a lot. Because they don't offer the service they just tell you that you wouldn't qualify. Even worst case you may have to go with a mortgage only product if you have open collections, judgements, etc. Might have a bit higher rate but with the amount of cash down, loan should make it through provided you income is sufficient. What state are you in?
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| | Saturday, March 03, 2001 - 11:58 pm I'm in Kansas,was told FHA wouldn't work because of low FICO. I have net income of 4600 per month
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| | Sunday, March 04, 2001 - 07:09 am FHA does not have minimum credit scores per se, but they do look at overall history. Find somebody who knows FHA. If you can't find anybody let me know. CHAPTER 2, SECTION 1: CREDIT HISTORY (09/95) 2-3: ANALYZING THE BORROWERS CREDIT (09/95) Past credit performance serves as the most useful guide in determining the attitude toward credit obligations that will govern the borrower's future actions. A borrower who has made payments on previous or current obligations in a timely manner represents reduced risk. Conversely, if the credit history, despite adequate income to support obligations, reflects continuous slow payments, judgments, and delinquent accounts, strong offsetting factors will be necessary to approve the loan. When analyzing the borrower's credit record, it is the overall pattern of credit behavior that must be examined rather than isolated occurrences of unsatisfactory or slow payments. A period of financial difficulty in the past does not necessarily make the risk unacceptable if a good payment record has been maintained since. When delinquent accounts are revealed, the lender must determine whether the late payments were due to a disregard for, or an inability to manage, financial obligations, or to factors beyond the control of the borrower including delayed mail or disputes with creditors. [Page : 2-4 09/95] While minor derogatory information occurring two or more years in the past does not require explanation, major indications of derogatory credit, including judgments and collections, and any other recent credit problems, require sufficient written explanation from the borrower. The borrower's explanation must make sense and be consistent with other credit information in the file. We also recognize that some prospective borrowers may not have as yet established a credit history. For those borrowers, and those who do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments, or other means of direct access from the credit provider or may elect to use a nontraditional mortgage credit report developed by a credit reporting agency as described in paragraph 2-4, below. Neither the lack of credit history nor the borrower's decision not to use credit may be used as a basis for rejection. The basic hierarchy of credit evaluation is the manner of payments made on previous housing expenses, including utilities, followed by the payment history of installment debts, then revolving accounts. Generally, an individual with no late housing or installment debt payments should be considered as having an acceptable credit history unless there is major derogatory credit on his or her revolving accounts. When reviewing the borrower's credit and credit report, the lender must pay particular attention to the following: A. Previous rental or mortgage payment history. The payment history of the borrower's housing obligations is of significant importance in evaluating credit. The lender must determine the borrower's payment history of the housing obligations through either the credit report, directly from the landlord or mortgage servicer, or through canceled checks covering the most recent 12-month period. B. Recent and/or Undisclosed debts. The lender must ascertain the purpose of any recent debts as the indebtedness may have been incurred to obtain part of the required cash investment on the property being purchased. Similarly, a satisfactory explanation must be provided by the borrower to account for the omission of any significant debt shown on the credit report but not listed on the loan application. The borrower must explain all inquiries shown on the credit report. [Page : 2-5 09/95] C. Collections and Judgments. We do not arbitrarily require that collection accounts be paid off as a condition for loan approval, but we do require that court-ordered judgments be paid-off before the mortgage loan is eligible for insurance endorsement. (An exception may be made if the borrower has been making regular and timely payments on the judgment and the creditor is willing to subordinate that judgment to the insured mortgage.) Both collections and judgments indicate the borrower's regard for credit obligations and must be considered in the analysis of creditworthiness. D. Previous mortgage foreclosure. A borrower whose previous residence or other real property was foreclosed on or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for an insured mortgage. However, if the foreclosure of the borrower's principal residence was the result of extenuating circumstances beyond the borrower's control and the borrower has since established good credit, an exception may be granted. Extenuating circumstances do not include the inability to sell a house when transferring from one area to another. E. Bankruptcy. A bankruptcy (Chapter 7 liquidation) will not disqualify the borrower if at least two years have passed since the bankruptcy was discharged and the borrower has reestablished good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs. An elapsed period of less than two years (but not less than twelve months) may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited an ability to manage financial affairs and the borrower's current situation is such that the events leading to the bankruptcy are not likely to recur. A borrower paying off debts under Chapter 13 of the Bankruptcy Act may also qualify if one year of the pay-out period has elapsed and performance has been satisfactory, and the borrower also receives court approval to enter into the mortgage transaction. [Page : 2-6 09/95] 2-4: CREDIT REPORT REQUIREMENTS (09/95) CREDIT REPORT REQUIREMENTS (Traditional). The credit report submitted with each loan must contain all credit that is available in the repositories accessed and provide an account of the credit, residence history and public records information as is available in the credit repositories of each borrower responsible for the mortgage debt. The minimum credit report required by FHA is a "three repository merged" credit report (TRMCR). A Residential Mortgage Credit Report (RMCR) from an independent consumer reporting agency may also be used. One report is required for each borrower or a joint report may be obtained for a married couple. The TRMCR submitted must be an original received electronically and printed on the lender's printer or delivered by the credit reporting agency and must not have white-outs, erasures, or alterations. It must indicate the name, address, and telephone number of the consumer reporting agency and each account listed must show the primary repository from which the particular information was pulled. The name of the party ordering the report must be shown. The credit report must include all credit and legal information not considered obsolete under the Fair Credit Reporting Act, including bankruptcies, judgments, law suits, foreclosures and tax liens that have occurred within the last seven years. All inquiries made within the last 90 days must also be included on the report. The credit report must identify each borrower's name, social security number and, for each debt listed, the date the account was opened, the high credit amount, required payment, the unpaid balance and payment history as contained in the credit repositories. The report must be in an easy-to-read and understandable format without the need for code translations. The lender must also separately develop credit information for any open debt listed on the loan application but not referenced on the credit report. Accounts listed as "rate by mail only" or "need written authorization" require separate verification. While the TRMCR should prove sufficient for processing most loan applications, the circumstances that require ordering of a RMCR include: 1. The borrower(s) disputes accounts on the TRMCR as not his/hers/ theirs; or 2. The borrower(s) claims that collections, judgments, or liens reflected as open on the TRMCR have been paid and cannot provide separate documentation supporting this; or 3. The borrower claims that certain debts shown on the TRMCR have different balances and/or payments and cannot provide current [Page : 2-7 09/95] statements (less than 30 days old) attesting to this fact; or 4. The lender's underwriter determines that it would be prudent to utilize a RMCR in lieu of a three repository merged report to properly underwrite the loan. If the lender orders a TRMCR and subsequently orders a full RMCR, the borrower may only be charged for the RMCR. A borrower may not be charged for both a TRMCR and a RMCR on the same loan except when delays on the part of the borrower require the TRMCR to be updated and a RMCR is ordered for one of the reasons described above. The lender must make every effort to determine the need for the RMCR within this time frame to avoid the additional charge. As always, the borrower may only be charged in the amount billed by the credit reporting agency. If a RMCR is used by the lender, it must access at least two (2) named repositories, meet all the requirements of the TRMCR, plus the following: • Provide a detailed account of the borrower's employment history. • Verify each borrower's current employment and income (if obtainable) and include a statement attesting to its certification of employment and date verified. If not obtained by an interview with the employer, the credit reporting agency must state why this was not done. • Each account with a balance must have been checked with the creditor within 90 days of the credit report. CREDIT REPORT REQUIREMENTS (Nontraditional). A Nontraditional Mortgage Credit Report (NTMCR) is designed to assess the credit history for borrowers without the types of trade references normally appearing on a traditional credit report. It can be used either as a substitute for a TRMCR or RMCR for those borrowers without a credit history with traditional credit grantors, or to supplement a traditional credit report having an insufficient number of trade items reported. A NTMCR may not, however, be used to enhance the credit history of borrowers with a poor payment record or to "manufacture" a credit report for those without a verifiable credit history. It may not be used to offset derogatory references found in the borrower's traditional credit, such as collections and judgments. If the information obtained through the standard credit report is not sufficient for the lender to make a prudent underwriting decision, the lender may use a NTMCR developed by a credit reporting agency that documents all nontraditional credit references. Otherwise, the lender must develop its own nontraditional credit history consistent with the requirements described below for credit reporting agencies. [Page : 2-8 09/95] The credit report agency is to consider only the types of credit that require the mortgage applicant to make periodic payments on a regular basis. The type of credit that can be used may consist of payments for rental housing and utilities (if not included in the rental payment), telephone service, cable television service; payments for various types of insurance (excluding those paid through payroll deductions) such as medical, automobile, life, and household or renter's insurance; payments to child care providers, school tuition, payments to local stores, payments for the uninsured portion of any medical bills, etc. 2-5: CREDIT ELIGIBILITY REQUIREMENTS (09/95) In addition to the credit analysis described above, a borrower must be rejected for any of the following reasons: A. Suspensions and debarments. A borrower suspended, debarred, or otherwise excluded from participation in the Department's programs is not eligible for a FHA-insured mortgage. The lender must examine HUD's "Limited Denial of Participation (LDP) List" and the governmentwide General Services Administration's (GSA) "List of Parties Excluded from Federal Procurement or Nonprocurement Programs" and document this review on the HUD-92900-WS. If the name of any party to the transaction appears on either list, the application is not eligible for mortgage insurance. (An exception may be made when a seller appears on the LDP list and the property being sold is the seller's principal residence.) B. Delinquent Federal debts. If the borrower is presently delinquent on any Federal debt (e.g., VA-guaranteed mortgage, Title I loan, Federal student loan, Small Business Administration loan, delinquent Federal taxes, etc.), or has a lien, including taxes, placed against his or her property for a debt owed to the United States, the borrower is not eligible until the delinquent account is brought current, paid or otherwise satisfied, or a satisfactory repayment plan is made between the borrower and the Federal agency owed and is verified in writing. Tax liens may remain unpaid provided the lien holder subordinates the tax lien to the FHA-insured mortgage and, if any regular payment are to be made, they are included in the qualifying ratios. Tax liens may be eligible for inclusion in a refinance in some cases (see Chapter 1). Although eligibility for a FHA-insured mortgage may be established by performing the actions described above, the overall analysis of the creditworthiness must consider the borrower's previous failure to make payments to the Federal agency in the agreed-to manner. [Page : 2-9 09/95] C. Credit Alert Interactive Voice Response System (CAIVRS). Lenders must screen all borrowers using CAIVRS (except on streamline refinances). If CAIVRS indicates the borrower is presently delinquent or has had a claim paid within the previous three years on a loan made or insured by HUD on his or her behalf, the borrower is not eligible. Exceptions to this may be granted under the following situations: 1) Assumptions. If the borrower sold the property, with or without a release of liability, to a mortgagor who subsequently defaulted and it can be established that the loan was not in default at the time of assumption, the borrower is eligible. 2) Divorce. A borrower may be eligible if the divorce decree or legal separation agreement awarded the property and responsibility for payment to the former spouse. However, if a claim was paid on a mortgage in default at the time of the divorce, the borrower is not eligible. 3) Bankruptcy. When the property was included in a bankruptcy that was caused by circumstances beyond the borrower's control (such as the death of the principal wage earner or serious long-term uninsured illness, etc.), the borrower may be eligible. If the lender has reason to believe the CAIVRS message is erroneous or must establish the date of claim payment, it must contact the local FHA office for instructions or documentation to support the borrower's eligibility. Our local offices can provide information regarding when the three-year waiting period has passed or that the social security number in CAIVRS is an error. The local offices can also provide instructions to lenders regarding processing requirements for other HUD-related defaults and claims (e.g., Title I loans). Lenders must write the CAIVRS authorization code for each borrower on the HUD-92900-WS. We cannot alter or delete CAIVRS information reported from other Federal agencies such as the Departments of Education, Veterans Affairs, etc. The borrower and/or the lender must contact those agencies to correct or remove erroneous or outdated information. We do not require a "clear" CAIVRS access number as a condition for mortgage endorsement, but the lender must document and justify its approval based on the exceptions described above. [Page : 2-10 09/95]
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| | Tuesday, March 20, 2001 - 11:05 am Perfect information! Don Semler . I am also building credit. Don't know where to find the agent that can provide me FHA Loan. I am not working right now but my husband does and I have a good credit, his gross income $63,000 but his credit is bad. 2 paid charge offs and 1 paid student loan, lots of late payment. Don't know if we can qualify for FHA Loan. We live in NY and looking for the house around $ 200,000.
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| | Saturday, March 24, 2001 - 03:16 am Find your mortgage limits for your county at: https://entp.hud.gov/idapp/html/hicostlook.cfm Sorry, don't do NY. If you want email me and I may be able to recomend someone in the state.
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| | Saturday, March 24, 2001 - 05:51 am Thank you so much for your input Don! I really appreaciate.
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| | Saturday, March 24, 2001 - 10:48 am Don, thanks so much for posting the guidelines and taking the time to post. You once offered to fax me a rate sheet, I'd greatly appreciate faxes with interesting programs and/or underwriting guidelines. My fax # is 206-202-4653 I do miss not actively brokering any more, it's been a few years now. Regarding Extenuating Circumstances Don, can you give us some examples of what does or doesn't work? I assume that unemployment (senator) and illness still qualify. But in the mid 90s loan reps told me that FNMA was going to change their guidelines to EXCLUDE divorce. I found that really ridiculous, did that really happen? Also, is documentation required? I.e. unemployment letter, hopital bills, etc. I find that many people just want to "start over" and throw everything away. You're the only loan broker who takes the time to post, really appreciate that! Readers can find Don's e-mail and URL in his PROFILE (click on his name next to his postings.)
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| | Monday, March 26, 2001 - 04:14 pm I think with the "Extenuating Circumstances" it's realy a gut call. Does the story make sense. I've had to rarely produce documentation that was not readily available. Employment is easy as it shows up on a VOE. Medical bills generally show on a BK or in the credit report. The biggest thing is to look at the persons current situation. Have they been paying on time. FNMA and FHLMC are much less forgiving than FHA. The biggest annoyance is people that just don't give a damn about there credit and payment history. These are the habitials. I see many post on here about people trying to "beat" the creditor. Those are not the people that I want to work with. You borrowed it, you should pay it back! End of story! Or the post from people who haven't even let the ink dry on their BK and want to know how to get more credit. Are you people nuts? You couldn't handle it the first time. Having personally spoke with Senator, his deal woudl work FHA but the house he is looking to buy is above the limits. The only way for that size purchase is to wait until he fits FNMA/FHLMC guidleines. As for the divorce issue. The mere fact of a divorce is not in itself an "Extenuating Circumstance". People get divorced everyday and keep up the payments. Divorce plus loss of job, OK that works. Courts don't usually stick a non-working spouse with all of the bills either. Usually a non-working spouse would get alimony/child support, etc. So in all I think a lot of it just boils down to plain common sense. Christine--- What type of rate sheet do you want? No-doc, NINA's, Straight b/C, Conforming?
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| | Monday, March 26, 2001 - 07:47 pm Thanks much for the clarifications, Don. I have a follow-up on divorce. I've been told that just because a Judge orders a spouse to pay certain bills it does not mean that those accounts will not be reported on the other spouse's reports. I.e. the credit bureaus and creditors couldn't care less about the divorce papers, the originally signed contract with the creditors overrides because a Judge can't tell American Express (or whoever) what to do or report. I don't have an recent experiences with this though. As far as rate sheets, maybe a confirming and a jumbo with the basic guidelines?
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| | Tuesday, March 27, 2001 - 05:00 pm Your correct about the credit issues with regards to divorce. Creditors don't care what the court says. Actually most divorce papers just state the the one party will hold the other harmless. Meaning if the ex-spouse trashes your credit you have to sue them. Good luck!! Your fax is on it's way. Just one off the top of my head along with all the other info you wanted.
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| | Tuesday, March 27, 2001 - 05:01 pm Thanks, Don!
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| | Thursday, April 12, 2001 - 06:50 pm Can I qualify for a conventional mortgage while a defaulted student loan is in rehabilitation....meaning that I am making the payments towards rehabilitation....it will not be completely rehabilitated until June 2002 after which the loan will be completely removed from my credit. But I want to buy a house before then. Is that possible?
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