Is my income more valuable than my credit score?

Asked by Ctbuyer203, 06461 Thu Nov 3, 2011

My longtime girlfriend and I are looking to purchase our first home. We were hoping to qualify for an FHA loan between $200k - $250k with a 3.0-3.5% down payment (mean purchase price for the area is $235k).

Our problem lies with credit score, and specifically how much weight it is given when qualifying for such a loan. I have poor credit (578 when i pulled my report this time last year), but have been rebuilding it with a co borrowed auto loan for the last 13 months (not sure what my score is today, hopefully more than what it was). She has excellent credit 700 . We both have incomes of about 50k/yr and have been at our jobs for 4 years each.

We have not yet applied for the loan, the question is, does the added income I bring to a loan application outweigh the negative effect of my awful credit score?

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Jim Simms’ answer
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Thu Nov 3, 2011
Trying to hit any minimum threshold is tricky when contemplating applying for a mortgage. Even though every lender has a minimum threshold for credit, hitting that number does not mean the application will be approved. The type of loan being used will determine what else needs to be addressed. For example, in my shop we require at least one traditional trade line showing up on the credit report plus at least 2 non traditional accounts where there are not three total on the report. An underwriter may not accept the co-signed account unless the car is in your name. The only way to find out for sure is contact a loan officer and have them take a look.
A lot more on my blog about fixing credit, see the link below.
1 vote
Eric Khan, Mortgage Broker Or Lender, Milford, CT
Thu Jun 19, 2014
Most lenders today have minimum credit score requirements and they cannot be offset by income or assets.

580 Fico score is the lowest acceptable credit score I'm aware of for FHA financing.
0 votes
Ctbuyer203, Home Buyer, 06461
Wed Mar 19, 2014
Not so much of an answer here as it is an update. I am the OP of this post, and I thought some of you on who have come across this post might want to know how this turned out.

Well, it turned out that Yes, my credit score was a debilitating factor, and we wound up getting the house we wanted but only in my girlfriends name. No surprise there.

The twist comes in almost two years later when I accepted a new position in the Raleigh-Durham area of North Carolina. This new position pushed me into the six figure income category. In addition to the increase in income, I was also given the ability to place 20% down on just about any property due to a large sum on liquid capital I received through inheritance.

Now I know these circumstances are rare and its not everyday that someone doubles their income and gets a large amount of cash dumped on them. I know I am very lucky.

But the lesson I learned here is when we applied for a new home after this demographic change (not to mention the purchase price was $330k+), my credit score was no longer prohibitive and we were given a new loan (in my name only) without any issue.

Credit score is important, really important. But definitely not the only factor.
0 votes
Just a note to say -- Ctbuyer203, you rock.
Flag Wed Mar 19, 2014
Susan Cassidy, Agent, Milford, CT
Wed Mar 19, 2014
I strongly suggest that if you have any questions about financing that you find a good loan officer and talk to them about it. There are a lot of different loan products that have different credit and income requirements. A loan officer could also give you specific recommendations about improving your credit score. Most of the larger real etate brokerages in the are have in-house loan officers who are very skilled, and will be happy to give you some free advice.
0 votes
allan erps,A…, Agent, Pearl River, NY
Wed Apr 25, 2012
It does not if your score is below 600. It will not be used, but if you have rebuilt that FICO score to 620 or better there should be no problem. Best of Luck
0 votes
Ken D'Ademo, Agent, Milford, CT
Thu Nov 3, 2011
Couple of things, go to to see what your credit report looks like now, because,if your debt to income ratio has changed, your credit score could have gone down, but depending on your income, debt and score will determine your eligibility. As others have said, shop around with different lenders to see what they offer you. There are a lot of web sites that can help you with their information. In Milford, Peoples Bank, William Raveis Mortgage, and Milford Bank have very knowledgeable mortgage people who can answer a lot of questions and help you prepare. The website below may help answer some of your questions. Remember you are not obligated to use any lender unless you choose to, that is offered to you for reference. You also should hire a REALTOR, and remember not every agent is a REALTOR, but every REALTOR Is a licensed active agent. A buyers agent works on your behalf, and it normally does not cost you anything. (there are exceptions)
0 votes
Carolyn Nisi…, Agent, Fairfield, CA
Thu Nov 3, 2011
Congrats on building your score up. You may be able to qualify for a state backed program. My advice is talk to a good lender for first time buyers. I can recommend Milford Bank. They have an awesome 1st time buyer program. Realtors are not the authorities on financing as the rules are changing almost daily. Give them a call and get your answer from the experts.

Best of luck,
Carolyn Nisita
Wm Raveis. 203-257-0030
0 votes
Annette Levi…, , New York, NY
Thu Nov 3, 2011
No! Credit score shows your willingness to pay your bills. There are 3 qualifying parts of a mortgage:
ability to pay (income)
willingness to pay (your credit)
collateral (the house)
Go to your local nonprofit housing group. Meet with the credit counselor. They will go over your credit report with you and tell you what you have done wrong and what you need to do. Follow their advise and within a year your credit score will be good enough for a mortgage.
0 votes
None, , Madison, CT
Thu Nov 3, 2011
Both Income & Credit are important. Your credit score will determine if you qualify for any given loan product. Your income (and combined income) will help determine how much a lender is willing to let you borrow. As Sally mentioned below, I'd strongly suggest speaking with a few local lenders to review your options. Someone needs to take a good look at what your numbers will really allow for a loan- what you earn, any outstanding debt and your current credit. If you don't already have a lender, I'd be happy to suggest some quality local mortgage professionals in the Milford & Greater New Haven area.

Scott Silverstone, Realtor
William Raveis Real Estate
The Jacobson Team
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0 votes
Sally Grenier, Agent, Boulder, CO
Thu Nov 3, 2011
The short answer is NO. The long answer is: talk to a lender or mortgage broker who can review ALL of your financial information for you and your girlfriend. There isn't "one" thing that has more weight than another. You really need to sit down with someone who can review everything. If you don't qualify now, they might be able to identify a few things you need to work on so that you will qualify down the road.

P.S. DO NOT use an online lender. You want someone local, who has your best interests in mind.
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