Financing in Westville>Question Details

Chrystal, Home Buyer in Deptford, NJ

how do i get pre approved when my credit isnt that great?

Asked by Chrystal, Deptford, NJ Sat Jul 2, 2011

me and my husband want to get a house and get pre approved from a lender . but when i tried they said first i had to get off my parents mortgage and second i had to pay off a debt. but in order for me to do that i would have to take out a loan. what should i do?. should i give up on getting a house all together?. my parents are willing to take me off their mortgage. and show proof they pay it.

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Q: how do i get pre approved when my credit isnt that great?
A: Great credit isn't needed, but typically you cannot have poor credit. For most loan programs lenders want to see that your credit is free of late payments and delinquencies for the most recent 12 months, some even want to see that the last 24 months have been clean. What is on your credit, when it happened, if it's owing or paid (like in the situation of a collection/charge-off/judgment/tax lien) and what caused it are all taken into consideration.

Q: me and my husband want to get a house and get pre approved from a lender . but when i tried they said first i had to get off my parents mortgage and second i had to pay off a debt. but in order for me to do that i would have to take out a loan. what should i do?
A: The two "actions" you have been asked to do are because of something else - as there is nothing in any mortgage loan programs guidelines that says you "cannot be on someone else's mortgage" or "you have to pay off debt". Those "actions" are a result of a guideline the lender did not think you met - for example the specific actions you have been asked to take are often because of a debt-to-income ratio issue, like your monthly payments (when including the new proposed mortgage payment) would be too high to qualify for a mortgage compared to your income. Did the loan officer tell you that was the underlying reason?

Now it's interesting, because if you are on your parents mortgage, and you are not living in the home, and they make the payments on the mortgage on time as well as from an account solely in their name, then the mortgage payment amount should be excluded from your debt-to-income ratio - as you were just a "co-signer". Is that your situation? If so, did the loan officer ask you about those specifics? Did you bring it up to them? If not, then that is probably why the loan officer said your parents need to "take you off their mortgage".

As far as the "pay off a debt" comment, what is this particular debt that the loan officer told you to pay off? Was it a collection or charge-off? Often those types of debts do not need to be paid off, but it is lender/underwriter discretion, but not all lenders are the same so if you have been told it needs to be paid off by one lender then that doesn't mean all lenders would require it to be paid off. If it was a judgment or tax lien, then those are much more serious and need to be dealt with one way or another (paying them off, or setting up a payment plan). If it was just plain ol' credit card debt or something along those lines, then the loan officer again may have mentioned that your debt-to-income ratio was too high and paying off the debt would lower it.

So the information you've provided so far, while it's a good start, needs more substance in order for you to get better feedback. Just like your loan officer had to review everything about your situation, any other mortgage professional would have to do the same, there are no short cuts or you'll find yourself getting denied for the mortgage after you've paid for appraisals, home inspections, etc. A short list of missing information would be:

1. Income
2. Monthly payments on consumer debt (credit cards, student loans, car loans, etc.)
3. Why do you feel your credit "isn't that great"
4. What your credit scores are, same for your husband
5. The full situation with your parents mortgage you are on
6. Sales price range you intend to buy in
7. How much in down payment you are planning on putting down

Remeber, ANYONE can buy a home with a mortgage, it may not be today, but you can purchase a home with a mortgage, you just need a plan to do so, and then execute that plan.

If you need help, or want a 2nd opinion about your situation, I'd be more than happy to assist.

Shane Milne
NMLS #81195
Loans in all 50 states
0 votes Thank Flag Link Sat Jul 2, 2011
Chrystal,
You have received good advise here. I have several good mortgage contacts as well that would be happy to review your situation and discuss your options. You would be a great client for any Realtor. Too many prospective homeowners Want to find their "perfect" home, then look at finance options. You are very smart to explore qualifying for a mortgage 1st. If you complete that step it also makes you a stronger buyer in the eyes of a seller. So continue to check into qualifying and I'm here to help if you want me to do so.
0 votes Thank Flag Link Sat Jul 2, 2011
Hello Chrystal,

I wouldn't give up on your goal of home ownership. It sounds like your parents are prepared to solve half of your hurdle. If you are not currently working with a Realtor, let me know. I would be happy to assist you, and guide you through this process to your new place! I live and work in Gloucester County. Enjoy your 4th of July weekend!

-Larry
0 votes Thank Flag Link Sat Jul 2, 2011
Hi Chrystal,

Your Realtor can give you the names of a few mortgage reps who specialize in helping people who have less-than-perfect credit. I personally have a wonderful guy that I can refer you to. He also helps with credit repair if needed.

If you are on your parents' mortgage and they making timely payments, then I wonder why that is not being reported to your credit. That may be something we can do to boost your credit score.

You should NEVER give up on getting a house! That's the American dream and it is achievable with patience and hard work.

Regarding the debt you have, I would have to know more information before I can recommend a few options on how best to take care of it.

I live in the Collingswood area and do work in the Deptford/Westville area. Let me know if you and your husband want to grab a cup coffee sometime soon and go over your options.

Have a good holiday weekend and good luck to you!
Web Reference: http://www.FamousEric.com
0 votes Thank Flag Link Sat Jul 2, 2011
It sounds like you have gotten some good advise:
Why haven't you done it?

Establishing good credit and buying a home is a long project of many steps: No matter whom you talk to and what you do, it is not going to happen overnight!

It sounds like your best option would be an FHA loan, which is not driven by your Credit Score, but rather by your Income to Debt ratio. Your Credit score wil take a long time to repair, but you could be in a good debt ratio very soon.

Get off their mortgage and make sure that you are not on their Title too.

A good Mortgage person will advise you about what you need to do to get your finances in order; they do more than take applications. Notice; I said a "good" person.

Good luck and may God bless.
0 votes Thank Flag Link Sat Jul 2, 2011
Chrystal,
Follow the advise of your credit counselor. Fix your credit score!
Reduce your debt obligation, increase your savings.
This will save you a big pile of money over the lifetime of a mortgage.
And, when you do get into your home, continue to save, live modestly, control your expenses and be prepared for future bumps in the road.
0 votes Thank Flag Link Sat Jul 2, 2011
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