Financing in Minneapolis>Question Details

Needyourhelp, Home Buyer in Minneapolis, MN

My Fiancee and I want to get pre-approved for a mortage. Our question about our credit scores, incomes, and first time home buyer's tax credit.

Asked by Needyourhelp, Minneapolis, MN Sat Feb 13, 2010

Thanks I am currently engaged and we are at the very beginning stages of looking for a house - meaning we want to get pre-approved for a mortgage. Neither of us have owned a home before. I have a credit score of 650, which I realize isn't ideal. However, I've started making a good income now ($160k last year) and have been working on improving my credit score. My goal is to get it to at least 700 asap, but I'm not sure how quickly I will be able to do it. I believe my fiancee has a very solid credit score (not exactly sure but well over 700), but her income is lower (around 30k annual).We will have a good amount of cash available for a down payment, between 20 - 30k. What is the best way for us to approach a pre-approval loan? Also, I was wondering if there is a clever way we could take advantage of the first time home buyers 8k tax credit. I realize I don't approve of this because of my income level, but my fiancee does. What is the best way we can approach getting our first loan?

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The very best way to get started is to contact a lender you trust to meet with you for a Pre-approval/ Affordability analysis. You can do a lot of research online and find out what you might be approved for, but there is no substitute for sitting down face to face with a professional who has the expertise to answer your specific questions. From what you put in this question, you should be well qualified to purchase a home in your affordability range. As to the tax credit, I will give you my opinion with the caveat that I am not a CPA. Before you rely on this opinion, I would urge you to consult a CPA and get something in writing from him/her. It is my opinion that your fiancée should be able to claim the entire $8,000 tax credit. Last year’s tax credit would have been $4,000 each but this year’s version allows single borrowers to claim the entire credit. Although all household members have to be first time buyers, I can see no evidence that the AGI income of all household members is considered when determining eligibility. For confirmation, give me a call and I will pose your specific question to my CPA. I would also be well equipped to work with you on the Pre-approval and Affordability Analysis.

Peter Boyle 612 701 6816
0 votes Thank Flag Link Wed Feb 17, 2010
First step is obtaining a loan pre-approval. Depending on the type of income you receieve (whether you are commissioned or salaried) as well as your credit will impact your loan approval, but based on what you have stated above I don't foresee you having a problem getting pre-approved. Interest rates are still very low, and even though purchasing with cash would be ideal, you have to wiegh the fact that home prices are very low right now as well as interest rates and it may be a good move to purchase in this buyer market. And why waste money on rent when you could be building equity now! It sounds like you may not qualify for the tax credit, but I would discuss that with your accountant as they wil have specifics on your situation.
0 votes Thank Flag Link Tue Feb 16, 2010
Mr. Mishra, once again, you take the words out of my mouth (except the application part - I'm not licensed in that state). As you get closer to the most important day of your lives (yes, the wedding), I'd rather you have the money to spend on that and put as little money down as possible. The FHA loan as Mr. Mishra suggested is a good program for you. The minimum is 3.5% down. For every $1000 you put down, you save about $5 a month. So, think about how could use the rest of the money for your wedding and honeymoon, home furnishings that you didn't get as a present, furniture etc. You can also (after the purchase) use the money to pay down any balances on your credit report that exceed 50% of the credit limit on the credit cards. Some lenders for FHA may charge points on your score, so ask the loan officer what the ideal score is. There are programs available that will tell you what you need to do in order to increase your scores, but make sure it's through the loan officers system and not the ones on the internet. So, I'd say minimum down payment, FHA, find out what can be paid down or paid off by the loan officer and as mentioned, ask a CPA about the tax credit. DO NOT pay off collection accounts that will affect your scores. Bad credit affects your score for 12 months. If you pay off an old collection now, you'll have a new collection account with a zero balance and your scores will tank.
0 votes Thank Flag Link Sun Feb 14, 2010
Needyourhelp,

This will be A-Typical advice for a realtor or loan office but I think you should wait a year or two and buy a house for cash. With a little bit of budgeting and a $190K annual income for the two of you, you should be able to save up sufficient cash for a pretty nice house in a year or two. At that point you don't need to worry about a credit score and with no monthly mortgage payment, probably never will again.

Good Luck!!

Cameron Piper
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Sun Feb 14, 2010
Dear HomeBuyer,

Congratulations on the engagement . You might want to start with improving your credit rating. I think you said you are working on this. You would really want to get your score over 749 if possible. This credit score would qualify you for a fantastic mortgage product with a low interest rate. You can qualify for a mortgage with a lower credit score, but you will pay a higher interest rate for that mortgage product. I have blogged about ways to help boost credit scores here, this might be helpful to you. If you need assistance with credit repair I can also provide some strategies to you. Good luck!

Hannah Fliegel
The Credit Repair Expert
415-999-9348
0 votes Thank Flag Link Sat Feb 13, 2010
650 isnt ideal? Is that a typo? I just got a buyer wil a 652 middle score approved for an FHA mortgage.

Don't worry to much about it. Put toghether Last 2 years tax returns, last 3 bank statements, last 4 paystubs and it should be it for begginers.

Also, if you are far away from getting married it could be an idea just to apply yourself on the loan, unless you really need her income , then, ok, she could apply too.

The best way, pick up the phone, do an internet search, call a friend that bought a home recently aks for their Mortgage Consultant person, set up an appointment, show up, and get pre approved!


Best.

Benito.
0 votes Thank Flag Link Sat Feb 13, 2010
You need to talk to an experienced mortgage broker. Let me know if you need a name, or two. I have 2, or 3 people that I know can help you.
0 votes Thank Flag Link Sat Feb 13, 2010
Why not visit with any qualified loan officer(s) first, see exactly what your budget can handle and check those credit scores again--your officer may have tips on how best to improve your score in fastest time. Unfortunately, the tax credit is just that--can only be claimed after the transaction has taken place.
http://www.irs.gov/newsroom/article/0,,id=204671,00.html
0 votes Thank Flag Link Sat Feb 13, 2010
As a real estate agent, I recommend talking to a very experienced mortgage officer with your specific questions. That is the only way you can get a solid answer about your best course of action.

The BEST mortgage officer that I have ever met, is Bob Strandell at Bell Mortgage in Golden Valley. You can check out his credentials at http://www.bobstrandell.com and then contact him for a personal appointment.

I send all of my clients to Bob for advice, because he is the most skilled, experienced, and unselfish mortgage officer that I have ever met. He has done both of my mortgages and countless others for all of my clients over the past ten years.

That's the best advice that I can give. He will set you on the right path. Best wishes.
0 votes Thank Flag Link Sat Feb 13, 2010
Hmmm, wow. There are lots of factors at play here. I would suggest contacting a qualified loan officer or mortgage professional to discuss the variety of issues at play. You say she's your fiance, so you're not married. She may qualify for the tax credit, but because she'd be buying it on her own, she'd also have to qualify for the mortgage. So, unless you're buying a house for around $90K or less, I suspect she wouldn't be approved for the price point you desire. If you have the cash to supplement it, that's great. But it sounds like you only have the $20-$30K for downpayment money.

I suspect you'll have to get on a plan to get that credit score up, maybe 6 months or so to show a history of on time payments, maybe paying stuff off, etc. to raise it to the degree where you would qualify for the amount of purchase price you desire.

Again, I stress, talk to a qualified mortgage professional who can help you weigh all the pros and cons of your scenario. Feel free to contact me for a referral!
0 votes Thank Flag Link Sat Feb 13, 2010
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