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Vigario

What are my chances for an FHA loan?

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Looking at $60,000 to $90,000 houses.
I make 40K a year gross and been at my current position for 10 years
My current FICO is 594 thought I'm hoping it will go up in September since I just got a couple CLIs. But FHA requires a 580 for a 3.5% downpayment.

I've been looking at houses on Zillow and using their mortgage calculator with a 4% downpayment and a 5% interest rate.
Honesty I'm just guessing on the interest rate I don't know what it would be for me. Do you know?
But with information in the zillow calculator my mortgage even at $90,000 with taxes, etc would be the same as I pay in rent right now and have been for the last four years.

Before I even step into a bank, do I have a chance? If so, at what interest rate? I'm in Michigan if that helps and I'm a first time home buyer.

I would love to get into a house I own by the end of this year if I can.

Edited by Vigario

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FHA isn't score driven for rate. But it may be hard to find a bank that will do a loan with your scores, most banks have overlays that require higher scores.

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The scores arent all that is looked at - first I agree with the post above anything below 600 is very tough - banks dont want the risk and their investors arent buying the loans so they raise the min score requirement -

What is holding your score down - any collections? Judgments?

Anything that is showing as a negative on your report will be considered - it isnt just the score

 

B

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It's a combination of length of good credit and five negative marks on my report. Four of those negative marks are collections. All under $400 each. I've since paid off two of them in the last few months. But there are still two which are not paid off and last updated at the end of 2014. The other was a tax lien that has been released. I also just got my first credit card in over a decade just six months ago which is making all the positive upswing lately. The only other thing that had been reporting positive on my report was my electric bill.

So the bad score was really just from years of neglect and not paying bills. Most of which have fallen off over time. Just these five that remain on there and me becoming conscious of my credit in the last year and starting to fix it.

So I guess I don't understand how FHA loans really work then. My assumption was that you needed a minimum 580 score to be approved. But you guys are telling me banks want a higher score, so why do they even mention 580 then? What kind of score do I actually need then? Where is the best place to get an FHA loan. My current bank is Chase. I figured I'd start with them but is that not a good idea?

This is all new to me, I've never bought a house. I'm just now learning it all. What do I need to do and what kind of interest rate should I be keeping in mind when looking at houses. How high can they go?

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FHA isn't score driven for rate. But it may be hard to find a bank that will do a loan with your scores, most banks have overlays that require higher scores.

What is an overlay?

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FHA makes their rules - banks must follow them but can make their own rules which are more restricting - there are banks that say they will do scores below 600 - we have people coming on here almost bragging about how they found a bank and they are going to buy a home - I have yet to see any of them follow up with us sharing how they were sucesful - usually they just disappear when they discover we were telling them the truth - The higher your scores the better - you may also run into a tradeline issue if you havent had credit in a long time and just have 1 card - the guidelines ask for 3 tradelines - 2 years or older with one showing a higher limit (2k)

 

I would try to get the scores as high as possible but there are a few banks that still do loans down to 600 -

 

Rates for fha are great right now you will probably be able to get something in the mid to high 3's if you are able to get in soon -

 

Good Luck

B

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FHA makes their rules - banks must follow them but can make their own rules which are more restricting - there are banks that say they will do scores below 600 - we have people coming on here almost bragging about how they found a bank and they are going to buy a home - I have yet to see any of them follow up with us sharing how they were sucesful - usually they just disappear when they discover we were telling them the truth - The higher your scores the better - you may also run into a tradeline issue if you havent had credit in a long time and just have 1 card - the guidelines ask for 3 tradelines - 2 years or older with one showing a higher limit (2k)

 

I would try to get the scores as high as possible but there are a few banks that still do loans down to 600 -

 

Rates for fha are great right now you will probably be able to get something in the mid to high 3's if you are able to get in soon -

 

Good Luck

B

Part of me hates what you're saying because it sounds like I still have a little way to go. But I also realize you're hitting me with the truth, I really appreciate the advice.

 

I was hoping I could get into something by the end of the year just because home prices are going up and interest rates as you say are pretty good. If I can get something with an interest rate in the mid-high threes (which is less than the 5% I was considering) that would make my monthly mortgage less than what I have been paying in rent the last four years (on time every month BTW lol). That would be so nice as these are nicer/bigger houses in a nicer area then the once I've been renting but also less per month. So I would be winning all around. Which is the reason I'm so driven to want to do this sooner rather than later.

 

So what would be your advice to me on how to proceed?

 

I ran a simulator on Creditkarma which gives me a Vantagescore of 585, nine points less than my Experian FICO score of 594. The simulator tells me that with my current CLIs I jsut got last week and isn't yet reflected on my credit reports, I should be in the 630 range next month. Which is a huge 40 point jump and I hope it comes true. If so, what are my chances at that point?

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Thanks for getting it - I have no stake in this but have made a career out of being honest and upfront with anyone and everyone that asks a questions about mortgages

 

You are close - The lack of recent credit may or may not be an issue - the rent payments will help even if you arent asked for them prepare copies of your last 12 months rent checks and include it in your file - it cant hurt = you are trying to show an Underwriter that you are serious and ready to pay on time

 

Get the scores up a little - do nothing negative while you are getting ready - a late pay now would be a set back

Even if you can only get two of the three above 600 you chances and options will increase -

A lot of banks want a 640 or above still - they stay busy so its kind of their way of cherry picking loans -

Not all banks are as busy and create more business by working with the lower scores - You wont get the best of best fha rate but you wont be in the 5% range -

Do you have a down payment ready?

 

Brian

 

BrianBTheLoanProfessor

Mortgage Forum Lead

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Man you should click the "Apply Now" link in Brian's signature. He will be able to tell you if you qualify and what you need to do if you don't.

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No, it's better to go with a mortgage broker like Brian who can shop around and get you the best deal.

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No, it's better to go with a mortgage broker like Brian who can shop around and get you the best deal.

Exactly!

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Fair enough. Either way I'm waiting until September when my new CLIs will appear on my reports and hopefully give a little boost to my score.

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So just a quick update. I checked Credit Karma this morning and it's showing a 53 point increase on my credit score. TU 638 EQ641
The reason there is a slight difference I think is because the baddie I paid off is showing as closed on my EQ but not yet on my TU. I'm going to dispute that to get TU to show it as closed.
The big jump has to do with my credit line increase and zero balance on my card now being reported.

I know this is credit karma and not my actual FICO score. But a couple weeks ago when I pulled my actual FICO EX score it was 9 points higher than credit karma was showing. I won't be able to pull that FICO Ex score again until September because of the one pull per month limitation on the Discover website. But I'm hoping it reflects the same kind of increase as credit karma does.

Even so, according to you guys it sounds like I'll need to get another credit card in rotation for a while and a longer positive credit history before I would be approved for a mortgage.

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So just a quick update. I checked Credit Karma this morning and it's showing a 53 point increase on my credit score. TU 638 EQ641

The reason there is a slight difference I think is because the baddie I paid off is showing as closed on my EQ but not yet on my TU. I'm going to dispute that to get TU to show it as closed.

The big jump has to do with my credit line increase and zero balance on my card now being reported.

 

I know this is credit karma and not my actual FICO score. But a couple weeks ago when I pulled my actual FICO EX score it was 9 points higher than credit karma was showing. I won't be able to pull that FICO Ex score again until September because of the one pull per month limitation on the Discover website. But I'm hoping it reflects the same kind of increase as credit karma does.

 

Even so, according to you guys it sounds like I'll need to get another credit card in rotation for a while and a longer positive credit history before I would be approved for a mortgage.

That score from Discover is a FICO 8 score. Your mortgage FICOs may be lower.

 

Read this thread: https://creditboards.com/forums/index.php?showtopic=574263

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With low scores you could also look into the NACA mortgage program, but from what I hear it's not a quick process.

Edited by Bannister

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NACA does not use your credit score, but concentrates on your payment history and overall financial picture over the past two years instead. The process is not quick, and the average person takes about six months to complete the process, but the program will get you an unbeatable mortgage product.

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