Financing in 85298>Question Details

AZ buyer, Home Buyer in Gilbert, AZ

Trying to get a loan

Asked by AZ buyer, Gilbert, AZ Tue Jun 19, 2012

My wifes credit score is 639 she has NO late payments, in fact all are on time and her credit report has no charge offs or deliquents just a bk about 11 years ago. We are under contract for a house and close on Aug 1st (at least is scheduled for that date). Our broker told us in the beginning that if we paid 4 or 5 of her credit cards down to half the balance that we could get her score to 640 which is the min. required now I guess. She has a long time and great paying job. What I see on her credit report is that she has about 20 credit cards and 15 that have a balance of which is more than 1/2 of the limit. I called a friend of mine who is an agent and he seems to think that we should pay ALL of the credit cards down to half of the cc limit. we are running out of time and really need this house. Can anyone give us good solid advice? If we pay down all cards to half of their limit it will cost us $6300 but only want to do that if the score updates in July, otherwise we wont....

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You have provided a ton of great information.

I would recommend speaking with a reputable local mortgage lender.

They will be able give you solid advice as to what "to do" and what "not to do" to get you to a point where you want to be.

I would be happy to help you.

Gordon@az1homesearch.com
602-552-6421
0 votes Thank Flag Link Mon Jul 14, 2014
Hi AZ buyer,

Sorry to hear of your situation at this point of buying a home. I know it can be confusing with the conflicting advise from your lender & others in the answers below. To corroborate a few important items:

- With FHA financing, since AZ is a community property state, both spouses monthly liabilities (minimum monthly payments) on their credit report are used to calculate the borrower's Debt-To-Income ratio (DTI), regardless if only one spouse is trying to qualify for & will be on the loan. The non-borrowing spouses credit score is not used, but the credit card debt is. Did your current lender include your minimum monthly debt when they calculated your wife's DTI? Better ask to be sure.

- A 580 credit score is OK to be qualified for an FHA loan and still get a great low rate with only 3.5% down required. We do just that - we accept & fund borrowers with down to a 580 credit score. Most lenders will add additional loan guidelines of their own, above & beyond what Ginnie Mae requires (Ginnie Mae is the entity that issues the "master" underwriting guidelines for FHA loans). Requiring a 640 score is one of those additional "lender overlays".

- If you still want to spend the additional $6,300 to to pay down your revolving debt (credit cards) to below 50% of your credit limit, be sure to do just that; BELOW 50% to avoid any additional interest or fees added to the monthly statement that may drive your balance back up to over 50%. Of course you need to be sure that any additional charges you make or on auto pay will not push you over 50%. But before you spend your hard earned cash paying down your wife's debt, as I asked you earlier, did your current lender include your minimum monthly debt when they calculated your wife's DTI? From what you explained, it does not look as though spending over $6,000 to pay down your wife's debt is required for you to qualify for your loan, with the right lender. You may need some of that $6,300 to pay down your debt.

- If you are closing August 1st, from what you described her, you have sufficient time to close your loan, again, with the right lender. For what it's worth, our average time to close is 22 days. When required, we have closed loans in 10 days.

Please feel free to contact me directly if you have any further questions, I'd be glad to help.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct
http://www.ezAZloan.com

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline loans (NO minimum credit score, NO appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, USDA, Jumbo, Conventional, plus, we allow Escrow Hold-Backs!
0 votes Thank Flag Link Fri Jun 22, 2012
One point of clarification to James' statement below. Here in AZ, as a community property state, your joint debts ARE included in your wife's debt to income ratios even if they are not jointly owned. Your credit and credit scores are NOT a factor in her getting approved. As far as paying down the debts, if you really want to do that (which again is probably not necessary) you have not necessarily missed a window of opportunity. You can pay the debts down, get a letter from each creditor stating your new balance, and then do a rapid rescore on your credit report. This costs a little bit of money depending on the number of accounts to pay down, but it can be completed 3 days after submitting the letters from the creditors showing your new lower balances. Getting those letters from your creditors generally takes a few days after you make a telephone payment as they want to make sure your payment clears your bank. So you could have all those accounts updated and new credit scores in as little as a week to 10 days. What I would suggest doing is looking at the rate/cost for the loan at your wife's current scores and then compare it to the rate/cost for the loan with 640+ scores and see if the difference is worth paying down the debts by $6,300.

Let me know if you'd like my help.

Brian Cardenas, Sr. Mortgage Consultant
AmeriFirst Financial, Inc.
Mobile: 480.233.7897
0 votes Thank Flag Link Thu Jun 21, 2012
First, under no circumstances apply for any credit now, even a secured card. Secondly, your scores should improve over 640 with just a few cards paid below 50%, but I agree, why not do them all?

In terms of will the score update in July, every minute you waste wondering only lowers the chance of that happening. In fact, I feel strongly you probably missed the July update unless you call each card and pay by phone. Even then, it may be too late.

In terms of the FHA, unless your income is necessary to qualify, and you are not on the loan, your scores have no impact. Even your debt has no impact, unless the debt is jointly owned.
Best wishes, Jim
0 votes Thank Flag Link Wed Jun 20, 2012
On an FHA loan, your credit is not considered, but your debts are considered in the debt to income ratios. It would appear that your lender is not well versed in FHA loans.
0 votes Thank Flag Link Tue Jun 19, 2012
I clicked through to your web reference but couldnt find the FHA guideline as it pertains to that. I will tell you that our house is in my name only and is 1 year behind (stopped paying going to do a short sale), also have a current auto loan and all my credit cards are all late and charged off. So I have bad credit. What would FHA loan consider as my debt payments in this case?
Flag Tue Jun 19, 2012
Additionally, my wife cannot qualify for an FHA because my credit is not good and we were told because of my credit (even though I will not be on the loan) she cannot get an FHA loan. So we are speaking of only Conventional freddie loan.
0 votes Thank Flag Link Tue Jun 19, 2012
You don't have to have a 640 to get a FHA loan. Lenders have their own requirements on the score, but you will find that some lenders requirements are harder than FHA requires. I have seen some require 640, 620, 600 and 580. I even had one lender state that they could do whatever it took even if they were below 580 (I am sure this lender will have some extra fees and higher interest rates).

So you could go with a different lender and not pay anything off. That said, the lender may not like that many open lines of credit either. You should be working with an agent and lender that you trust completely that know what they are doing and can guide you through the whole entire process. This is what we do for our clients.

Best Regards,

Brenda

Ron & Brenda Cunningham
West USA Realty
602-980-3133
Ron: 602-499-0694

*** Recognized by the Phoenix Business Journal as "One of the Top 50 Realtors in the Valley!" ***

Search the official FlexMLS like we do through our website for FREE:
http://www.CunninghamHomesAZ.com
0 votes Thank Flag Link Tue Jun 19, 2012
Sorry I ran out of space but FHA is out of the question because of my credit as the spouse, unless there is a way around this?
Flag Tue Jun 19, 2012
The best thing to do is to work with a great loan officer and trust them to do their job. The good ones understand credit scoring and what it takes to improve. It is somewhat of an art and they don't have control but should be able to lead you.

Good luck!!
0 votes Thank Flag Link Tue Jun 19, 2012
Thanks for the advice, at first the broker advised us to only pay down 5 cards to half or less of their balances and we did that in May but he repulled yesterday (month later) and no update to the reports or the score. So we did take his advice and now says he used a simlator and looked at if those 5 were completely paid off if it would change the score and he said the simulator still showed no change. Now we're worried we might not have a good broker.
Flag Tue Jun 19, 2012
Below are three lenders that I have worked with in the past. They are very honest and reliable:

Steve Ortiz
Cell 480-332-0763
steve.ortiz@academymortgage.com

Caroline Farrar
CELL 480 236 8643
Caroline.Farrar@imortgage.com

Sherry Youssef
Mobile: 319-530-9611
syoussef@afrhomeloans.com


Regards,
Johannes Rath

REALTOR (R)
ZipRealty, Inc.
Licensed in AZ
johannes.rath@ziprealty.com
Toll Free: 1.800.225.5947 x4127
Cell: 480.612.4958
Fax: 866.245.1356
My Profile: http://www.ziprealty.com/agent/jrath
0 votes Thank Flag Link Tue Jun 19, 2012
You don't need a 640 for FHA financing. Some lenders have that as a minimum, but FHA is 580 with the minimum down payment of 3.5%. You can pay down balances and that should help your scores, but we can process your loan for an approval with the 639 score and then work on your scores to get you over 640. You just get a little better rate if you're over 640.

Call me and I'd be happy to help.

Brian Cardenas, Sr. Mortgage Consultant
AmeriFirst Financial, Inc.
Mobile 480.233.7897
0 votes Thank Flag Link Tue Jun 19, 2012
Additionally, my wife cannot qualify for an FHA because my credit is not good and we were told because of my credit (even though I will not be on the loan) she cannot get an FHA loan. So we are speaking of only Conventional freddie loan. Advice?
Flag Tue Jun 19, 2012
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