Can anyone help?

Asked by Pat Snyder, Horsham, PA Wed Dec 23, 2009

I need to find a lender. I have over 20% to put down on a house. I make over 6 figures and I don't have a house to sell (already been sold). I do however, have a low credit score (about 620) due to divorce situation. Does anyone know who can help? I've been at my job for the past 7 years. I was using a mortgage banker, but evidently the lender she was hoping to use is closing the division. I asked about FHA and she said that it had to go manual. I have no idea what that means. This is so frustrating to me.

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22
Jeff K, Home Buyer, Bristol, PA
Wed Dec 23, 2009
Hi Pat,

You've gotten a variety of advice here, some of which I agree with and other parts I do not. I do think that it's too soon for you to start talking with an agent/realtor, since you are still trying to figure out how much you can borrow now, if you can borrow, or whether you would want to borrow at all - if the rate is high. So ... first things first - is figure out what the scoop is on the "lending front".

It sounds like you may have already spoken with either a direct lender or a mortgage broker already. So, if they have "run your credit" in the last 2 weeks, it still counts as the same query if someone else does it again for the "same purpose" (mortgage - NOT "credit card" or "car loan", etc). It has generally been my personal experience that I've gotten the best rates from Wells Fargo. BUT ... I don't know if they deal with sub-prime mortgages these days.

Usually, with a low credit score, lenders charge substantially more for lending you money. So instead of getting say 5% or so, you might pay 6.5 or even more! Over time this would cost you a lot of money. Some people seem to feel that FHA loans are at the same rate, regardless of credit score. I'm not personally sure on that account but I would be surprised.

My recommendation is, sure - talk with a lender and know what your options are right now - IF you proceed forward. Assuming that I'm correct, and that they'll quote you a high interest rate for that loan (if you offer you one), then I would think that you may wish to reconsider how you approach it short-term - and just spend 3-6 months building up your credit. You certainly do NOT need to engage the services of any company to help with this - most ways of improving your credit are very manageable to handle on your own. I'm not a fan of most of the companies that would "help" with your credit. Most of them just want your money.

You are already familiar with Earned Income Tax, but it varies by municipality, so this might factor into where you look into buying, now or later. Here's the official link on EIT rates for PA: http://munstatspa.dced.state.pa.us/Registers.aspx

Pat - I hope that this has been helpful for you, and please do feel free to respond with more information or ask more questions!

Regards,

Jeff
1 vote
, ,
Wed Dec 23, 2009
Pat

Please don't follow the advise of Dan Chase until after you buy the house, if you so choose. If you enter a counseling service, it will treated as a bankruptcy and you will have to wait 2 years to buy a house (1 year in some circumstances).

Manual underwrite allows the underwriter (decision maker - sort of) to look at all angles of your loan. However, just because a Bank says you have to go manual, doesn't necessarily mean you have to. If "she" said you have to go manual but "she" didn't try running it through Desktop Underwriter (DU), the "she" can't be sure that you have to go manual. Manual takes longer to underwrite. I would suggest that you find another branch of the same lender and have them run you through DU. Otherwise, find another lender that knows what they're doing.
1 vote
Dan Rich, , Doylestown, PA
Wed Dec 23, 2009
Here it is Dan. "Go manual" is just likely FHA underwriting terminology. See below.

There are two ways that your FHA loan can be underwritten (approved).

The easiest way is to run your application through the 'Automated Underwriting' software that is now available through all major lenders. If your overall credit history and income are sufficient for 'automated' approval, then we will certainly make every attempt to run your loan through the automated software. Automated approval is preferred simply because it allows the lender to basically skip the traditional underwriting process. In other words, if we have automated approval, then the lender simply has to verify that the information we listed in your application is accurate.


However, the fact is that the vast majority of my clients do NOT have sufficient credit to be approved by the automated software, and therefore most of my FHA loans require "traditional underwriting" - also known as manual underwriting. Traditional underwriting simply is the way underwriters had to review files BEFORE we had computers .... and they are still doing exactly this same process for many FHA loan files to this day.
Web Reference:  http://www.dan-rich.com
1 vote
Dan Chase, Home Buyer, Texas City, TX
Wed Dec 23, 2009
Pat asked "she said that it had to go manual. I have no idea what that means"

Can someone explain what it means (to go manual) without just saying contact me? I would not be surprised if the one who can explain what he needs will get a call.
1 vote
Sean Dawes, , Philadelphia, PA
Wed Dec 23, 2009
Pat,

I am at Long and Foster Real Estate and we have our own Mortgage company, Prosperity Mortgage which is a partnership with Wells Fargo.

I suggest you give Robert LaPierre a call or email.
robert.lapierre@prosperitymortgage.com
215-654-5904



Sean Dawes
1 vote
Erica Ramus,…, Agent, Pottsville, PA
Sat Oct 1, 2011
Jefferson's answer below is excellent. Work at raising your credit score. Rent for a while, raise that credit score, pay off old debts and then when your score rises talk to a lender.
0 votes
Benita Larmer, Agent, Northampton Township, PA
Sat Oct 1, 2011
Dan Chase' suggestion of a credit counseling organization will do anything but help if you want to purchase a home. Even back when there was all kinds of "Sub-Prime" programs, anyone listed as being in a credit counseling program was in a very challenging position in terms of being able to et a loan, and back then, almost everyone could get one. I was doing mortgages at that time and it was near impossible. Now we are dealing strictly with conforming loans, no room for the "outside the box" people.
The only thing you can do to repair your scores is to do your time and be responsible for your debt. There is no "quick fix" to being up scores, although with some work, letters and many phone calls, you may be able to work on some things that are negative and inaccurate. I have had an extensive history in asset based lender in commercial lending as well as residential mortgages and have assisted many clients in this regard. My number is 215-358-1100 ext 1187 or 267-231-5575(cell)
0 votes
Benita Larmer, Agent, Northampton Township, PA
Sat Oct 1, 2011
Incidentally, Jefferson makes alot of statements that are not necessarily true in mortgages these days. There really is no "Sub-Prime" market any longer. That went away years ago when the market began to crash. These days, people with lower scores, less down funds and shorter job history are more likely to be candidates for FHA loans. The rates are right in line with conventional programs for more established buyers. If you plan a course of action, please do it based on information from a knowledgable professional that you feel confident in.
0 votes
Benita Larmer, Agent, Northampton Township, PA
Sat Oct 1, 2011
I have had over 25 years experience as both a realtor and mortgage lender. Although your score is on the light side by today's standards, there are ways to bring it up and FHA is a good option for you. I use Jeff at Gateway because he knows the mortgage industry better than many and I trust very few with my clients. You may call him at 215-260-5412. It is a fabulous time to buy with rates and prices down. In a short time, I suspect the market will turn around and you will soon have positive equity.
Benita Larmer-RE/MAX Action Realty
2115-358-1100 ext 1187
0 votes
, ,
Tue Mar 30, 2010
I am a mortgage broker in Warminster and do credit scores down to 580. It sounds like I will be able to help you but need more information
0 votes
David Zucker…, , Frederick, MD
Tue Mar 2, 2010
Whenever I am working with a scenerio such as yours where you have cash and a few credit dings the first thing to do is run a what-if scenario through the credit reporting aggregator that I use. Basically I would enter the desired credit score improvement and the software tells me what to do and how much cash on hand is required. Hope this helps.
0 votes
Gita Bantwal, Agent, Jamison, PA
Mon Mar 1, 2010
Pat, I hope you have found a lender by now. If you are getting Fha financing please do it quickly. There are going to be changes in April to the program.
If you are looking for hud approved lenders, information for buyers, credit counselers go to http://www.hud.gov
Web Reference:  http://www.gitabantwal.com
0 votes
Robert LaPie…, Agent, Blue Bell, PA
Mon Dec 28, 2009
I can, call me at 215-654-5904..I'm in the offie now..
0 votes
, ,
Mon Dec 28, 2009
Dan
No offense. These agencies are there to "help" people as stated in their advertising, however, they are very well versed on getting people to sign the dotted line by using scare tactics. Although these companies are non-proft, they still charge a nominal admin fee (usually a percentage) each month. The client can refuse to pay the fee, but are given a major guilt ride and given less service than those who pay. I recommend people to CCCS when it's the last straw and talk them out of bankruptcy. You are correct in advising people to "call" CCCS, just don't go there unless you're ready to join up. Excuse me everyone for posting this here, but I figured Dan's caring comment was worth posting.
0 votes
Robert LaPie…, Agent, Blue Bell, PA
Thu Dec 24, 2009
You can go FHA with a 620 score and you don't need to put the whole 20% down. There will however be PMI or mortgage insurance on there just because it's FHA. I would suggest maybe putting about 10% down, have the PMI on there becasue you have to, then get your score uo to 680 by making on time payment and maybe clearing up some of the items on there and then refi to a conventional loan down the line to remove the PMI. The only reason I suggest the refi is because it's mandatory that the PMI stay on the loan for 5 years with FHA and you don't want to pay that for that long if you have enough equity in the house. Call me and I can go over the numbers with you and maybe recommend a few things to get the credit score up a bit. 267-240-6311..that's my cell..
0 votes
, ,
Wed Dec 23, 2009
Dan, you are correct.

I have clients all the time that go to a class or two and learn a few tips that might up their score by any number of points.

I recently had a client that called a few collection agencies and got them totally deleted from their credit report.

It is hard for people to do this on their own (there are companies that do this as a business-some are highly successful and some not worth a wooden nickel) but it works at times.

Credit repair (other than the basic paying down of credit cards) is very complicated. As an example, sometimes paying off a collection can lower a credit score (that is why a deletion is needed).

If you have a few collections on your report that haven't been updated in years, and all your tradelines (credit cards, auto loans, etc.) have been perfect over the past few years, then you might have an excellent credit score because your old negative information doesn't weigh as heavily as your recent positive information .

If you pay off those old collections, then the collection companies report to the bureaus that they are paid off (which is supposed to be a good thing) but it gets updated on your report and gets treated as a recent collection-even though you now have a zero balance.

I have seen this many dozens of times.

The credit reair companies usually have software that simulates the credit bureau's very complicated software so that they can tell you what will and what won't increse your score.

These are some of the things people learn in these usually free classes and that is why I send them there.

I have had clients that went from the 500's to the 700's
0 votes
Dan Chase, Home Buyer, Texas City, TX
Wed Dec 23, 2009
Bill, I said to talk to them. I figured a non-profit counseling service could give some ideas about what to do to increase the fico score. If you are told certain steps can help to make your fico score better it would make sense to follow that advice.

I did not say to enter into credit counseling to change the whole debt structure. I do agree that restructuring debt would not be a good idea. I thought if it was possible to do a few simple things that would help it made sense.

Have I gotten it wrong that non-profit debt counseling services do more than just consolidate debt?

I expected answers like pay off credit cards, do not close them. Watch your dti. By paying off these loans ( or judgements) first your fico score will be helped more than just paying off everything equally. Knowing what affects your score most determines what to do ( and pay off fastest) to increase your score.

I would think they would give strategies to follow that would make your financial outlook better even without changing any of your debt payments. Was that incorrect?
0 votes
, ,
Wed Dec 23, 2009
Pat, sorry to hear about your situation. I replied the following on your other post:

"Manual underwriting means that the underwriter looks over you file and check various other aspects of your loan.

This is done when you only qualify marginally. In certain cases, "compensating factors" are taken into account by the underwriter in a manner that can't be done by the standard underwriting software we are required to use in the approval process.

If this doesn't answer your question then please let me know by posting more information."

Now that I know more about your situation, I can tell you that your loan should not need manual underwriting.

It sounds more like you will need to be able to write a clear "letter of explanation" regarding every negative item on your credit report. If you can connect them to your divorce and show why you think this wouldn't happen again then you should be fine.

I mentioned "compensating factors" in your other post. Your length of stable employment is a strong example of a compensating factor.

Keep in mind that you will have to pay off most if not all of your open collections and judgements.

Feel free to contact me at 908-415if you'd like to further discuss your situation.

I hope this was helpful.

Goo\od luck.
0 votes
Janice Bokor…, , 19103
Wed Dec 23, 2009
Dear Pat Snyder,
I am a Realtor at Coldwell Banker Hearthside & I totally understand your situation since I went through it myself when I divorced a few years back. Carmella McGonegal at Morgage Mobility can be reached at this email address Carmella@mortgagemobility.com. I have also sent her a separate communication that you may be contacting her for help. I am here for you to help guide you through the process step by step & to get you into your perfect house. My contact details are below & I am available anytime you need me.
Warm Regards,
Janice Bokor
REALTOR-Licensed In PA & NJ
Coldwell Banker Hearthside Realtors
1094 Second Street Pike
Richboro, PA18954
Office: 215-322-0940 ext. 272
Fax: 215-357-4684
Cell: 516-637-9621
j.bokor@cbhearthside.com
http://www.cbhearthside.com/janicebokor
0 votes
Maria Taylor, Agent, New Hope, PA
Wed Dec 23, 2009
Pat,
Call Steve Lampson at Wells Fargo in Doylestown, Pa. 215.794.3111
Great mortgage rep. Many of my clients have been very happy with his services.
Good luck!
0 votes
Dan Chase, Home Buyer, Texas City, TX
Wed Dec 23, 2009
Pat, I would talk to a lender and/or a non-profit credit counseling agency. There may be some easy simple, and quick ( a few months) things you can do to increase your fico score.

I keep seeing lenders here say they can do that. I have no idea how except to pay off debt and do not use more debt unless you pay it off at the end of the month.

The lower your fico score is the higher the % you will have to pay for your mortgage. If you could improve it in a relatively short time it could really pay you back for many years to come in your monthly payment.

Dan Rich, thank you for explaining what manual is. I am sure Pat will find it helpful.
0 votes
Dan Rich, , Doylestown, PA
Wed Dec 23, 2009
Pat,

I just posted to your blog. I checked with a lender I deal with and they will go to 580 - depending on particulars. Contact me and I will put you in touch.
Web Reference:  http://www.dan-rich.com
0 votes
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