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Lower Credit Score - Own two homes

Hi
My husband and I recently fell into a situation where we inherited a home, plus we own our own home. We are looking to sell the home that we had previously owned. However, due to market values and the amount we owe on the home, we are upside down. So we are looking to refi the new home (home is paid off), and use some of the value to help us get to existing property sold.

Our credit scores are lower, I believe my highest score is 610 and my husbands was 597.  We had a lot of medical debt collection issues, which are all paid and cleared up. At this point, I'm not sure how much our credit score will increase, and I've been told a FHA will not work, although we were in the underwriting process and then were denied. And not becusae of our scores, but becuase they said the house "had no value" because we didn't purchase it. We'd have to wait 12 months for their to be value in the home.

Lost for ideas... Are their "high risk" programs out there.

  • December 04 2013 - Waukesha
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Answers (10)

I am a local lender in Wisconsin and I am able to do FHA financing, I know your post is a bit older but if you have not received help yet I would be happy to help you out and work with you to achieve your goals.

Regards,
Brynn

  • May 13 2014
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Hello ckubineks in Waukesha-

As Justin mentioned you do not need to be vested on title for 12 months in order to qualify for a FHA loan due to the fact that you inherited the property. See below;

An inherited property is eligible for either a cash out or a no cash out refinance, subject to applicable FHA requirements. Because the property was inherited, FHA's requirement that the original sales price be used in the maximum mortgage calculation if acquired less than one year prior to the date of the borrower's loan application will not apply.

If you have not refinanced this property yet please feel free to reach out to me through Zillow and I would be more than happy to assist.

FYI -  I am located in Oconomowoc, WI
  • January 30 2014
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Please try Harp program. Your LTV can be higher with HARP Refinaning Program.
  • December 09 2013
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Hi ckubineks

conventional or FHA you have 12 month waiting period before you can get cash out.
i believe you have 2 option 
option one get hard money loan
option two sell your house as short sale . ask your current lender to grant you a loan to pay for short sale of the house.

good luck

Omar Khamisa 
  • December 08 2013
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Dear ckubinkes,

It is obvious to me that you CAN restructure your financing.  You can pull cash out of the inherited property to pay down the mortgage on your primary home and then refinance your primary residence to lower your rate and then rate out one of those properties.  Your inherited home can be classified as a rental or second home.  

You will need to put some work into increasing your credit scores.  The best way to have address this issue is for you to work with a mortgage professional who can also refer you to a reputable credit company. Between the mortgage professional and the credit consultant, they can determine a course of action and steps to take in order to qualify for your loans.  Between both borrowers (you and your husband), the lower of the two mid scores must be a mid score of 620 which will allow you to borrower on most loan programs.  A credit evaluation will provide you the best path to achieving your goal of the 620 credit score.

If you would like further help in solving your problem, please feel free to contact me at [contact information deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]

Peter Campellone


  


  • December 07 2013
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FHA has guidelines and lenders can either follow them, or they can add their own additional restrictions.    These restrictions are known as overlays and are very common and specific for each FHA lender, especially when low FICO scores are a factor.

For a tough scenario like you mention, usually a local established mortgage broker is a good resource to reach out to as they will have experience on where is best to submit any given loan profile.    You can look in the Zillow directory for someone to meet your needs.
  • December 04 2013
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We are located in Wisconsin.


Justin - how do we go about finding a lender that allows the FHA scenario you listed? I thought the FHA guidelines applied all lenders?
  • December 04 2013
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Have you looked into qualifying for a HARP Loan?  What state do you live in?
  • December 04 2013
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I would find another FHA lender, assuming you already have moved into the inherited property or intend to move into it.   You will need to find one that follows the guideline correctly AND allows the low credit score.  

Below is an example of a typical FHA lender guideline for this scenario.

Cash Out Refinance - If the borrower has owned the property as his or her primary residence for at least a year OR the borrower acquired the property through inheritance and occupies or will occupy the property, use 85% of the new appraised value.
  • December 04 2013
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Hello,

The "house has no value" thing is not entirely accurate.  The issue is what's called "chain of title" which is basically a guideline that states at least one person must have been on the deed for at least twelve months in order to take equity out of the property.  

With where your credit scores are presently and what you've stated is on your credit report, I am very confident that with a bit of coaching and a rapid re-score we could get the scores up to a qualifying point very quickly.  

In the short term, since I'm sure you don't want to carry the other home for another 11 months I would look into getting a home equity line of credit.  My company does not offer a "stand alone" line of credit, so unfortunately I am not well versed in the credit requirements to get this kind of loan.  
  • December 04 2013
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