credit score for mortgage 2009
Credit score- Home Mortgage?
1) My credit score is 612 (Im working on improving it right now), and my wife’s is above 700. We will be looking to apply for a home mortgage mid-2009. Our combined income is over 100,000, and we are first time home buyers. We plan to apply through our credit union for the mortgage. Will we be approved?
2) Also, need help understanding debt-to-credit ratio. Will our student loans affect our chances of being approved? (we are not late on any payments)
3) Also, I am an authorized user for my wife’s credit card, so my debt-to-credit ratio is higher because she has almost maxed it out. Should I be taken off the card so my ratio goes down?
1) Keep working on your score. Your wife’s score is good, but you will get better rates if you can get above 720. You can still get approved once you are above 620, but will get much better rates the higher you can get your score. You said that you are first time homebuyers; make sure you do some research on the $7500 tax credit that you might qualify for. Be aware though that it is essentially a 15 yr interest free loan, and you will need to pay it back $500/yr on subsequent taxes. Credit Unions are a good place to start. They will usually approve members that have a harder time getting financing because they typically service the loan in house and they have history with you. But if your scores are 700+ you owe it to yourself to shop a few brokers/banks to see what else you can get.
2) Student loans will be calculated into your DTI (debt to income) ratio. If you make 100k then your monthly income would be $8333. The benchmark DTI right now is 36%. what that means is lenders do not want you to be paying more than 36% of your total monthly income towards debt (including your new house payment). So take your monthly income times 36% and you get $2999. Subtract what you are paying each month for car, personal loans, credit card, student loans, judgements/liens, child support from that figure and that is what you can afford for a house payment. Take that amount and divide it by 1%, that is the amount you can safely afford for a home loan. I emphasize the word “Safely”. Of course everyone wants more and will push that figure higher, do so with caution.
3) Most loans will look at both you and your wifes credit. Especially if you will be using both incomes. So regardless if you are taken off of the card, the balance will still come into play. I advise you to pay it down a ways, but dont pay it off or close it. You will want the history of payments if good, but it is also bad to show a lot of available open credit. Best to show some balance.
