One Borrower Has Income One Borrower Has Credit Score

When one borrower has most of the income… the other borrower has good credit scores… there ARE options for purchasing a home. Look at the question we had yesterday:

“We want to purchase a home, and I want to know if we can get it.  My husband currently has a mid credit score of 538,  and mine is 678.   He makes about 52,000 and I make 25,000.  I’m still in graduate school full time.  We saved  $4,000 for closing cost so far.  We want the house by the end of October 2010 Can we get a loan?”

Option 1:

Purchase a home using FHA, and have a non-owner occupied co-borrower on the loan with the borrower who has good credit scores. If you know that you can make the payments on your own, then having a parent, or other family member, on the loan will not be a burden to them.  After you’ve made 12 months of payments (and by all account mortgage interest rates will still be low a year from now) you can refinance the loan and take the family member(s) off.

FHA requires a 3.5% down payment. The good news is that in this environment, in our area, we are seeing sellers pay closing costs.  FHA allows sellers to make a 3% contribution towards closing costs.

FHA also allows you to get a gift for your downpayment! (for more information on downpayments, click here).

Option 2:

You can make an appointment to see a mortgage loan officer, and discuss your credit options. We are NOT credit counselors (like the ones you would see if you were considering Bankruptcy) but we “counsel” people ALL THE TIME on how to improve their credit scores.  Often times it can be done in 90 days!

If the borrower has a 538 credit score , and they’ve had 12 months of making all payments on time – the thing most likely keeping their scores down (barring bankruptcy, short sale or foreclosure) is the gap between the balance owed on credit cards and the high credit limit.  Taking the $4000 saved (in the example above) and paying down the balances MIGHT get the scores up 60 points or more immediately!

That’s why I’m suggesting that you meet with a loan officer.  Most of us have a “simulator” available to us that tells us what will happen if you close an account, or pay down a balance, or pay off a collection.  Again, I don’t suggest that you try and do this on your own… because a credit score is like a snow flake, each one is different, and each one is fragile.

So let’s say you take your savings, and work to get your credit scores higher… now you don’t have money for a downpayment! What do you do then?

• FHAMortgage Loans allow a gift for the down payment.
• Veterans don’t have to make a down payment.  It’s part of your VA Mortgage Loan Benefits!
• USDA Home Loan Program does not require a down payment at all! USDA requires that you live in a “more rural” area.  In North Carolina, we get rural fast, and in many cases, the whole county qualifies for USDA Home Loans!  For a list of those areas where the whole county qualifies for USDA Home Loans, click here.

If you or your family or friends are considering purchasing your first home - please call Steve and Eleanor Thorne 919-649-5058.  We pre-qualify, and counsel borrowers everyday, and we can help you purchase a home!  If you have more questions about Credit Repair, click here.