Of late, there has been a discussion in the MortgageFit forums, where a poster has asked queries regarding qualifying for a home loan. The poster is willing to buy a home for $667,000 with a down payment of 50%. She has a credit score of 620 and an income of $92k per year. Her husband is out of work, but he is about to have a job of $100k next month. His credit score is 700. The poster paid off all her credit cards as well as a delinquent account (medical collections). She's concerned that she might not qualify as her credit report still shows the credit card debts and the delinquent account. She asks:
How long will it take for her credit scores to improve?
What are her options for a home loan?
Will it be wise to keep her husband on the loan, even with no income?
It’s good to know that the poster has been able to pay off her credit cards and the medical collections. This will help her improve credit scores, but it’ll take about 30 days for her credit report to reflect the changes in her scores.
How can she improve her credit core fast?
She can take help of rapid rescore to improve her credit scores in quick time. Rapid rescore is a service through which your credit is evaluated to ascertain what is primarily causing your credit scores to drop. If you have any collections or any derogatory items on your credit report, and you’ve paid them off, companies providing rapid rescoring services work with the all 3 credit bureaus – TransUnion, Equifax and Experian - to have the items removed from your credit as soon as possible. However, this service can be availed only by lenders, not by borrowers. Thus, our poster can request her lender to do a credit rescoring as a quick solution to her issue with the credit.
Does the poster qualify with her current credit score?
The poster has a current credit score of about 620, which is good enough to qualify for a home loan at an affordable rate. Once the credit report is updated, it is going to take her scores further up. What’s also supposed to work in her favor is the 50% down payment she’s ready to make. Most of the lenders would want to offer the loan because their risk will be limited to a great extent due to the huge down payment she’ll be making.
What loan options does she have in this situation?
With a 50% down payment, she has the option of going for either an FHA loan or a conventional loan. FHA requires a minimum down payment of 3.5% and credit score of at least 620. However, conventional lenders require a credit score of somewhere around 700 at least. But given the 50% down payment, chances are that some of the conventional lenders would not mind offering her a home loan even though her credit is not very good.
Does it make sense to add her husband on the loan?
The poster does not need her husband to be on the loan in order to qualify. She can qualify (at least for an FHA loan) on her own with the credit score she has and the amount of down payment she’s making. Since her husband is not employed at present, he can’t help her qualify for the loan. Nevertheless, it’ll be a good decision to put his name on the loan as a non-borrowing spouse. This will help her add his name on the title to the property. Once he gets the job and starts earning, he can contribute towards the loan payments.
In case you want to view the entire forum discussion and expert comments on this issue, you can refer to the following page:
http://www.mortgagefit.com/predeal/about33906.html .