Weird situation

Guest

In July of 2008 we were under contract with a seller to purchase a home for $114,000. We were putting $56,000 down payment and financing $65,000. At the last minute our financing fell through due to my bad credit. We were able to find financing through a private business owner in town. He financed us the money at 8% and gave us two years to get credit cleaned up for a "refinance" and to pay him off. My question is this:

Would this be a refinance since the original loan was from a private individual or would this be considered a first mortgage?

gmakerley · Posted: Thu Nov 05, 2009 9:54 am Post subject:

"first mortgage" refers to the place a mortgage occupies in the land records - it is first, second, etc. it has nothing to do with a first-time homebuyer, which you are no longer.

yes, you would be refinancing, and you would be obtaining a new first mortgage. but don't let the terminology floor you - it's not at all essential to your obtaining a loan. and getting a loan from a private individual has no impact on your obtaining a refinance, as long as the lender can reasonably obtain verification of your payment habits.

Guest

Thanks for the info. I have been cleaning on my report. I have a few collections from 3 and 4 years ago that have been paid. I have a existing auto loan that I owe 4795 out of 15000 that I financed that is up to date. The last late payment I have on this account was in June of 2008. I have also started two credit cards that have a 300.00 balance that has about 12 months of current up to date payments and never been late on them. I am hoping for good luck when I go in. Not sure what my scores are at this time but I'll find out soon before I go speak with somebody.

gmakerley · Posted: Thu Nov 05, 2009 10:31 am Post subject:

you'll be wise to eliminate those credit card balances - take them to zero and don't use the cards for a while (keep them open, though). that'll enhance your scores.

raymond · Posted: Sun Nov 08, 2009 4:14 pm Post subject:

>>Not sure what my scores are at this time but I'll find out soon before I go speak with somebody.

You'll receive an "inquiry" ding if a Lender pulls your credit, resulting in a reduction in your FICO score. You won't receive the ding if you pull your own credit, so it's best to do it yourself first, and then just provide the middle FICO number to the Lenders you're going to be receiving quotes from. Be sure to tell them they're not allowed to pull your credit.

If you get your FICO scores from www.myfico.com, they're the same numbers I see when I pull your credit.

gmakerley · Posted: Tue Nov 10, 2009 11:16 am Post subject:

please bear in mind that if you desire any sort of official commentary from a lender (a preapproval, for example), that lender is not likely to use your personal report. also keep in mind that you'll be signing up for something when you pay for your credit score; you may want to be vigilant and not sign up for something that will simply drain your pocketbook for at least the next 12 months.

gmakerley · Posted: Tue Nov 10, 2009 11:19 am Post subject:

and of course there are those who say that $14.99 a month (or whatever the number is) isn't a drain on anyone's pocketbook. well, i dare say i won't pretend to know how much cash on hand people have, nor what kind of credit limits exist on their cards. one thing to keep in mind, as well, is that these monthly charges are posted to a credit card, and if someone is in the mode of paying minimums only, those balances will reach limit before too long...thereby creating the very situation one was trying to eliminate to begin with (lowering of credit scores).

that's just my take.

raymond · Posted: Tue Nov 10, 2009 12:59 pm Post subject:

>>that lender is not likely to use your personal report

The lender is definately not going to use the personal report. The purpose of getting your report is to find out if your middle score is a 614 or 620. No need shopping until it gets to the FICO level that makes the most sense, and if it does come in lower - you won't have to wait as long for it to increase because you didn't lose any FICO points from the Lender's inquiry.

>>you may want to be vigilant and not sign up for something that will simply drain your pocketbook for at least the next 12 months.

It didn't work like that when I used myfico.com to get my FICO scores, and my Brothers. In addition to getting my FICO scores, I wanted to access some other credit reporting features, so I paid extra and got Suzy Orman's FICO Kit program - and it costs a little over $50.00. I'm not familiar with any of their monthly programs.

After my Brother and I got our FICO figures from myfico.com, I pulled our credit (as a Lender) and the FICO numbers were identical. Then we got our credit scores from the three major Consumer reporting agencies, and those numbers were way higher then the FICO numbers. I've seen that alot, and don't know why the agencies charge people for their Credit Scores, because they can't be used for anything if they're not the same as the FICO scores.

jveenstra · Posted: Tue Nov 10, 2009 1:54 pm Post subject: Purchase

Bahlk,

Are you asking this question because you are wondering if you are eligible for the first time home buyer tax credit?

When you get a mortgage in two years, that will be a refinance.

This is a purchase. Did either of you own a home in the past three years?

riseabove · Joined: 09 Nov 2009 Posts: 70 12.67 Dollars($)

why do you get a negative impact on your credit rating just because someone makes an inquiry into your credit? Doesn't seem to make much sense considering you have no control over whether someone requests your credit rating or not?

raymond · Posted: Tue Nov 10, 2009 2:03 pm Post subject:

>>why do you get a negative impact on your credit rating just because someone makes an inquiry into your credit?

There are soft and hard inquiries, and you only get dinged for hard inquiries, because they're initiated by you when you apply for credit. You're dinged because you're considering additional credit, which increases your risk. Examples of soft inquries are to see if you are pre-qualified for a company's promotions, or a current creditor checking up on you, or an employer considering hiring you.

gmakerley · Posted: Wed Nov 11, 2009 2:37 pm Post subject:

raymond i stand corrected - you are right in saying that a lender will not use a consumer's credit report to do a preapproval, etc.

i was on myfico recently doing some research when i spotted their plan at whatever the price was, monthly. it was in the vicinity of the $14.99 i mentioned - that's why i cited it. i have no doubts you can safely use their service and not spend this money, but one needs to be vigilant when they sign up for anything...it's far too easy to overlook until you finally notice it hitting your credit card every month...down the road.

as for the "ding" on credit, that's an appropriate word for it. it's not a dent, and it's not a smash, it's only a ding when someone runs credit, and raymond is correct in noting that only a "hard" pull is going to affect a credit score. not only that, but i think we look too harshly at the random shop for credit that creates a "ding" inasmuch as the ding isn't going to be enough to ruin anybody's score.

let's face it...we all need credit once in a while, and shopping for new credit at a reasonable scale isn't really going to damage us as long as we are handling our affairs in the best fashion already.

of course, as for what the economy has done to most of us in the last couple of years, how many can say they're where they were 2-3 years ago credit-score-wise? that's not to say we can't make a comeback, though.

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