Posted on: 29th Nov, 2012 11:25 pm
The 3 year anniversary of our foreclosure is coming up and we are hoping to purchase a home in the next few months. We have re-established credit and have FICO scores in the 660-680 range. My husband has 2 collections on his credit from 3 years ago that he needs to get settled, but aside from that our credit is clean. We both have 4 credit cards and have refinanced one vehicle and purchased another in my name. We are self employed with the business being established in 2009. It shows increasing income and for 2012 we should have a gross of about $117K all reported on tax returns. We will have 3.5% down and hope to purchase in the $250-275K range. Is this a favorable scenario? Also, how much in reserves will we need to get approved? I understand the more the better, but what is the minimum the banks look for?
Hi Kandy,
The down payment seems to be quite low if you're looking for a conventional loan. In case of conventional loans, you will have to give around 20% down payment.
Thanks
The down payment seems to be quite low if you're looking for a conventional loan. In case of conventional loans, you will have to give around 20% down payment.
Thanks
You definitely need to go FHA. But, more important, do not pay off these collections, and do not dispute them. It will have a negative affect on your scores. While it may seem logical that paying off a collection will help your credit scores, it will have the opposite effect. The collections you have are being factored into you credit score based on the date the collection was reported. The older the reported date, the less it lowers your score. If you pay them off, they may be reported on your credit report as "Paid", but the credit reporting model will score these collections based on the date you paid them off, rather than the older date that they were reported.
If they need to be paid off, they can be paid off when you close on your next home purchase.
If they need to be paid off, they can be paid off when you close on your next home purchase.
In order to take out a conventional loan, you will have to make 20% down payment. If you cannot do so, the lender will not approve your loan request.