Situation: -Currently have a coventional Mortgage in Ohio (will be putting up for sale around March or April, 2004)--current on payments -Want a new mortgage in Tennessee--situation: -Bad News -each of our scores are in the 550-570 range -Good News -current combined income of $115,000 (I will quit my $30,000/year job, but should have no problem finding at least part time for at least $15,000)--How will this be looked at?? -$22,000 for downpayment + whatever we get from sale of house (not anticipating much--want to price to sell) -Hubby's employer pays all closing costs on new home I feel like we've got more good than bad going for us, but I've been so burned in the past by the darn old scores. My questions are: Will our scores alone kill us so that we'll have to pay a giant interest rate?? Who are the best mortgage companies to work with for someone in our situation? (Mortgage companies given to us by company relo dept--Wells Fargo, Wachovia, Washington Mutual--they allow direct billing to company for closing costs and they're familiar w/ company relo policies, etc.) Any help would be GREATLY APPRECIATED!! debtchoked
It's probably utilization more than anything else. I can do a little bit about that, but not a ton. I will have about $22000 around the beginning of June. I could use it to pay down our credit cards, but I thought it might be better used as a 10% downpayment. My thought was that if I used it to pay down credit cards 1) there's no guarantee it will bring our scores up high enough (620 from what I'm told) and then I'm stuck with lower scores AND no down payment 2)Even if it does elevate our scores, it might take too long. We need to be in a house by Mid to late July. What is your advice?? Thanks-Debtchoked
Since Oct. 1st I have paid down my utilization from 85% to 30% and have picked up over 100 points. I would use the most of the money to pay down your debt, get to 620, apply for a FHA loan that only requires 2.5 percent down. So hold back a 2.5% down payment from your 22k and use the rest for the debt.
That sounds like a good plan. I started to say hold back a little more for closing, but you said your husband's company pays closing. Maybe a little bit extra for unexpected stuff, but otherwise I agree with 420greg--pay down the debt.
...yeah...it's true... many companies now offer zero percent down payment loans, which means you get an additional loan for your down payment which is usually a little higher than your mortgage... with scores in the 500s, it's unlikely that you may get a loan at all, or, if you do, it will have a horrible interest rate which will be worse down the line... it is always better to tackle high interest loans first (ie, credit cards). again, i have to agree with the above poster because i paid down my utilization of my cards and my scores jumped from the low-600s to the mid 700s (all except one which still has a bad account from 6 1/2 years ago!!!, but that one went to the high 600s from high 500s)...
Thanks for all the great feedback everyone. I do have another question: How does AMEX green rewards affect utilization rates? We just got our cards in December 03 (getting AMEX is a BIG step for us). Because there isn't a credit limit on the card, I was wasn't sure how it would affect our scores. I'm sure (at least I hope!) it's not going to affect us negatively, but I was wondering if it will help our scores at all. Thanks again for all your great feedback. I love this board!!
Thanks for all the great feedback everyone. I do have another question: How does AMEX green rewards affect utilization rates? We just got our cards in December 03 (getting AMEX is a BIG step for us). Because there isn't a credit limit on the card, I was wasn't sure how it would affect our scores. I'm sure (at least I hope!) it's not going to affect us negatively, but I was wondering if it will help our scores at all. Thanks again for all your great feedback. I love this board!!
With cards like AmEx that have no limit, you still shouldn't overutilize because the main factor that brings down your score is debt... If you carry around a lot of debt month-to-month, it makes it look like you can't afford what you charged on your cards... I don't have a card with no limit (mostly because I don't want to be tempted) but my parents do, and they try to pay everything by the end of the month.
.....so...what i'm basically saying is bring your utilization down to a few hundred vs a few thousand so it doesn't look like you can't pay your debt... this will improve your score...
Actually, the best thing to do is to go online like the day before the statement prints and PAY IN FULL before you get the bill. That way, when it bills you will have a zero balance, and that will help your scores.
Thanks for the info. When are the AMEX statements printed? I paid my first bill online the day before it was due. (due Jan. 30, I paid online Jan. 29). I haven't seen AMEX pop up on our CRA reports yet. How long will it take before they start reporting?
