?'s for new homeowners re: loans?

Discussion in 'Credit Talk' started by Ender, Aug 8, 2001.

  1. Ender

    Ender Well-Known Member

    This is a question for all the new home owners that have been posting around here.. first off, congratulations and I hope I can be in your shoes someday soon.. (next year? 2 yrs?)

    I am wondering, what do they do when they do a credit check? What exactly is an FHA? Let's say i do get all 3 of my credit reports clear, do they still do some other more thorough credit check, checking the public records, etc.? For example, if I still have a judgement filed in a courthouse, but was able to get it removed.. or if I am in Chex or if I am in SCAN for example... do all these show up even tho my records are clear?

    Also generalyl speaking, what criteria do they look at? I've heard a few are:

    1) not a lot of open accounts, available credit
    2) no unpaid debts within the past 2 yrs such as chargeofss, etc. (so do they check your CR for this or can they find out some other way?)

    ..also what about your first home purchase - isn't there some break or some help involved in this? Thanks in advance everyone..
  2. NanaC

    NanaC Well-Known Member

    I can only tell you about my situation...they pulled the three credit reports and then hired a company to compile the information from the three reports into one report. They actually called the companies on those reports to get the most updated and complete information. However, only things on my credit report were considered except for the landlord which was added.

    I had, at the time, a BK13, 5 years from filing, 2 years from dismissal, 2 accounts listed as part of the BK, and 1 chargeoff paid, 1 unpaid. I had to pay the unpaid one...(as luck would have it, the CA removed it after I paid it...go figure).

    FHA questions are better left for the home experts but I believe it is some sort of program that backs up your loan thorugh the Federal Housing program in the government so there is less risk to the lender.
    I could be off on that one.

    I did not have any issues with Chex so don't know your answer on that one.

    HOpe that helps...:)
  3. Dani

    Dani Well-Known Member

    Hi Ender,

    I am still going through this tedious process. My husband and I went for a preapproval. We had a home picked out, but we didn't want to put a contract on it until we knew we were able to get funding. So far, everything is working out. When we went in we needed to have the following documents: 2 years of W-2s, a month of recent pay stubs, two months of checking and savings account statements and any additional assets (401Ks, stocks, etc.).
    What she did was look over all our documents and made copies of everything and pulled our credit reports. The report is tri-merged and it shows all your current accounts, closed accounts, and your credit score with each bureau. They do check public records and if you have had a bankruptcy in the past ten years. I asked our broker what were they looking for to get someone approved for a loan. She said solid employment (anything over two years in the same field), and no lates or chargeoffs in the past 24 months. She said their minimum score is 620 or higher. She did mention that they do make loans with people with lower scores, but they have to pull a few more strings, and a FHA underwriter actually has to sort through everything and make a sound judgement from there.
    Being first time homebuyers, my hubby and I went with an FHA (Federal Housing Administration) loan through Freddie Mac. It is the easiest way to become a homeowner without having to come up with the standard 20% down. Our downpayment is 3%. They do make 100% and 103% loans, but there are penalities with them if you sell your home in eight years or less (at least the 100% works this way).
    Although, the credit reports are important they're not the only thing that matters. Most brokers want to see you're able to afford the home and have substantial savings set aside to put toward closing costs and the downpayment.
    In mid October, we meet with our broker again to make sure everything is still the way it should be - no additional debt, enough savings, etc. It is somewhat nerve wracking, but it is worth it when you step into your new house (I don't know this part for sure, but I hope it is worth it.) We'll see in 3.5 months. If you have any other questions I will try my best to help.

  4. roni

    roni Well-Known Member

    I can tell you about my situation. First of all to qualify for FHA loans you just have to all debts settleed or paid. They do not luck at scores at all. So technically you could have the worst credit on Earth, but if you clean it all up and are current you will get funding. They especially look at debts in the past two years.

    As far as how extensively they pull your credit and public records, they are very, very thorough. For instance in my case, I have a pending lawsuit from a former employer who is suing me for breach of contract after I filed a complaint against HIM for withholding compensation for my services as a independent contractor/ associate in his office. Anyway, I was not even served any papers and this guy filed the small claims suit against me just weeks before I applied for the mortgage, they already had information on it and wanted an explanation. That proves they go FAR beyond just checking your credit reports.

    They also want your bank statements from all banks that you deal with, along with other assets like stocks, 401Ks etc. Ok that's all i have for now...later and good luck!
  5. MikeB

    MikeB Banned

    I have 2 accounts on the same CRA that have one 90 day late each (all paid) that are only one year old now. All lates on the other two CRAs are at least 2 years old with one 3 yr old unpaid utility bill chargeoff (I know I would have to pay it first). I heard that FHA only goes by the middle CRA and ignores your best and worst CRA records. I wonder if this is true? If not, I guess owning a home is not in my future until next year.
    I am planning on going to the bank soon to find out.
  6. MikeB

    MikeB Banned

    Also, I have more than a few overdrafts on my checking account, but my account is never negative over two weeks. I guess this will hurt me too:(
  7. Momof3

    Momof3 Well-Known Member

    FHA will of course pull a tri-merged report, in my case it was for myself and my husband, they use the middle score, however they use the lower of the two, mine was 673, but they based our loan on his which was 632 at the time. They will run a check for any leins, BKs or judgements. FHA is not score driven, they basically look at the whole picture and not just your score. They want steady employment, and also prefer 24 months of a good payment history, any charge offs, collections are expected to be paid prior to final approval, however it all depends on your lender and what the underwriters requirements are. I have seen some that didn't have to pay, but for the most part they need to be paid. It is good to get yourself a good broker who will get you the best deal with your circumstances.

    As far as accounts and balances go, we went straight FHA, and as long as your ratios are in line they really didn't seem to mine, we have alot of accounts and credit available, but our ratios meet the requirements and it was never brought up. We at first we going to go for the VHDA, which is 100% financing, but they had requirements such as a certain number of accounts opened in 12 months period and certain number of total accounts you had etc, we decided to skip that hassle and go straight FHA through desktop underwriting.
  8. roni

    roni Well-Known Member

    FHA doesnt look at scores at all. I had a Eq : 720, a TU : 560 and a Exp : NA...my lender couldnt get a score from EXP...something weird there. So obviously there are no rules for scores when dealing with FHA b/c neither lender..my present one or Wells FArgo which I applied to in January cared about the NA from EXP and never bothered to get it from EXP.

    They look at income, debt ratios, paid debts and like mom said.....public records etc.
  9. NanaC

    NanaC Well-Known Member

    Oh, and the fact that we had 3 years of perfect rent payments was a huge big plus...so if you have a good long rental history...that should help!

    Hmmm...FHA did look at our scores....must be different rules for different circumstances???
  10. MikeB

    MikeB Banned

    Thanks Nana, I do have 2 years of good rental history, and the payments are about the same as the expected mortgage payments. The house sales price is also 20% less than tax appraised value, so I would think that would help especially if the property appraiser conforms with the tax appraiser.

    Thanks for your info too Roni. I have around a 610-620 EXP, 570 Equifax, and TU is probably a little lower than 570. I guess I will just cross my fingers. Worse comes to worse, I have to wait a year before getting approved. I will at least have a much better down payment to use, and my credit scores will be better.
  11. Ender

    Ender Well-Known Member

    Thanks for all the detailed responses.. it looks like I am getting mixed responses as far as scores are concerned. My overall goal is to get a loan of 8% or below? I am assuming that is definitely prime and would be considered a great loan?

    This would be considered my first home.. and so I hope I can get the first home buyer's benefit. What does this mean exactly? Does it mean I don't need to put at least 20% down? If I don't however, doesn't that mean I have to pay an extra few % for something? I forgot what it was called off hand..

    Also, as far as checking for judgements.. my goal is to have all public records removed by the time I want to get the home.. but that would mean I would need to get the satisfied judgement vacated.. but i am not quite sure if that will happen. I think I may be able to get it removed from my credit report, but actually vacated would be a different story.. so would they actually nkow about this? From Roni's past, it sounds like they would so I should have a story ready..

    As for everything else, if i still have chargeoffs, but they aren't shown on my CR, i am home free on that, is this correct?

    As for rental payments, how do they go about confirming this? Would I give them the apartment places I lived at and the houses? I will have lived about 2 yrs at my parents by the time I am ready to get a house.. so technically, I don't really have rent history.. would it be possible for me to ask my parents to vouch for my payments? However, before now, when I was in college, I lived 5-6 yrs with perfect rent history..

    Also, does the amount of the loan make any difference? I plan on purchasing a 3-4 bdrm house and I believe it's going to run me about 500k-750k is the broad range for that..

    What is a good % BTW? Like what would be the prime rates? Also, I am wondering if I should tap into 401k and ROTH IRA.. but that's a whole 'nother issue.. perhaps I should check out fool.com for that info.. any answers to the qusetions I asked is greatly appreciated.. thanks again everyone!
  12. GEORGE

    GEORGE Well-Known Member

  13. Ender

    Ender Well-Known Member

    I found for my county:


    So I guess I would have to be able to come up with around $100k or so capital? Is there other way to also get a secondary loan if I wanted to get a $750k house?
  14. Dani

    Dani Well-Known Member


    To answer your first question different brokers hold a different value on credit scoring. For an example, credit scores probably won't be considered for an individual with a substantial downpayment saved, great income, very little debt, and a solid payment history. On the other hand, my score did play a part in putting our preapproval through. Although, we had savings set aside and a decent income our debt ratio was above standards (45%) so our broker focused on our scores to put it through.
    In our area (VA), FHA will only finance to $275,000 (levels may differ over the country depending where you live and the average home price in that area). If you do meet FHA requirements and put less than 20% down you must pay PMI (Private Mortgage Insurance). It is caculated into your montly payment. PMI is insurance for the bank if you default on your loan. It is removed once your home reaches 78% equity and your montly payment will decrease.
    Concerning your rental history, most brokers will contact your landlord (either by phone or mail) to check that you make timely payments. Some brokers also, want to see cancelled checks to prove this.
    First time homebuyers, can pull up to $10,000 (per individual) without penalty out of their IRA. A husband and wife can withdraw up to $20,000. You still have to pay federal withholding on this, but the 10% early withdrawl penalty is removed. Anything over $10,000 (20,000 for couples) is subject to the 10% penalty plus federal withholding.
    I hope this answers some of your questions.

  15. Shirley

    Shirley Well-Known Member

    Having never owned a home, but realizing that there are a lot of factors involved, would anyone care to say what kind of savings they had (ballpark) when they applied?

    We'd like to buy something in 2003 but fear we won't be able to because of a tax lien that will be released but according to experian will be reported for 15 years if unpaid (it won't be paid).

    In any case, we have very little savings. The cost of living in NY is very high and the majority of our salaries pay the rent and utilities. We rarely carry a balance on credit cards and have no debt at all right now other than maybe a couple of hundred on next month's cc bill. I'd hate to have our credit clean and the only thing standing in the way is a lack of savings.

    We qualify for a VA loan and have a certificate of eligibility for one but it seems from reading this thread that even if you have such a guarantee and can make little or zero downpayment, mucho funds are still required.

    I have no clue what closing costs are or even a range for them so any help would be appreciated. We are putting away as much as we can but it's really not that much and won't add up to very much in two years either. I'm just curious about what we will be up against and if there's a chance for us to actually get something if we only have say $5k in savings, no debt, and a perfect rental payment history.

    Thanks in advance. This has been one of the most educational threads here in a long time.
  16. Dani

    Dani Well-Known Member


    Our cost for settlement and our down payment is approximately $13,000. We went in with $2500 saved up (not the smartest move, but pure spur of the moment). Between here and closing we have (and continue to save) an additional $7000. We offered the seller above price for the home so we could finance some of our closing costs. So the seller is paying toward some of our closing costs and we are financing the additional money in our loan. Depending on the cost of the house closing costs is approximately 3-4% of the home's total cost. Then you can base how much you want to put down for the house depending on if you take the FHA route or a conventional loan. Brokers today offer so many different programs there is something for everybody. Good luck.

  17. dtembe

    dtembe Active Member

    I am going through getting a home loan right now. I am 1 to 1.5 years away from having prime credit. I currently have open collections on my credit reports from 1995 and 1996. I want to get into a house by next month. I have rebuilt good credit in the last 3 years. My scores from tri-merged report are as follows: 568,572,593
    Here is how I am working the the loan process.
    1) I live in Dallas,TX so I posted an ad in DFW.FORSALE for recommendations on a mortgage broker. I got quite a few responses from different people.
    2)I called all the brokers and interviewed them. I asked them about their mortgage products. If they work with open collection and charge off accounts. Do they have products that will allow open collections to stay unpaid? Talk to a lot of brokers and you will know which one can only do rubber stamp loans and which ones will work for their money. I wanted one who would go back to the lender and try to get more for me. Some brokers told me that there is no one who can work with open collections. One quoted me a rate of 11.9% for the mortgage. Some brokers I spoke with were nothing more than order takers, they want 2 to 4 % for filling a credit application. I was amazed that people actually recommended these dimwits.
    All brokers will want to see a copy of your trimerged report. In my case I let one broker run my trimerged report and faxed the copy to all other brokers who seemed like they had some idea on getting a mortgage and seemed honest.
    3) One very important thing ask them how much they charge ? I am using a broker who is charging me 1 point origination fee and .5 point on the rate. I have had brokers tell me that they charge anywhere from 1 to 4 points on sub prime loans. Be very careful when choosing the mortgage broker.
    4) Right now I am sitting with an approval for 95%LTV at 8.55% APR on the loan, no prepayment penalty, from my broker. I called him yesterday and told him, that is not good enough. I want 97% at 8.25%. I told him to call the lender and work him. As per my broker, if my middle score was 580 then I could get 100% LTV. Remember mortgage broker works for you not the lender.
    Anyway, I am expecting an answer from him this afternoon. If nothing else I will take the rate but I want 97% minimum LTV. I don't have enough saved for a down payment over 3%.
    5) If it does not work out, I have told him to start working with some other lender. My trimerged credit report has already been run so I am having my broker shop for a mortgages based on that report.

    Just wanted to share my experience. Even with crappy FICO and Credit, I think I have a good chance of getting a mortgage.
    A link for some more info on mortgage brokers business. I learned quite a bit from here.
  18. cosjef

    cosjef Well-Known Member

  19. the other

    the other Well-Known Member

    I put 3% down on my house. I also increased the purchase price slightly so that I could get a 3% seller concession. At my closing I paid around $450 for the attorney, and about $4500 for the closing costs, taxes, etc.

    Shirley, where in NY do you live?
  20. Ender

    Ender Well-Known Member

    Thanks for all the responses on this BTW.. I'm sure I'll have more questions as the time gets closer for my home purchase..

Share This Page