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Profile picture for Frederick1971

We have decided to buy, aiming for this time next year or sooner perhaps.

Wife and I have decided to purchase a home. Our joint gross monthly incomes are approx $7K total auto loans per month is 970 per month. Currently renting, she has been renting over 10 years always making rent payments on time and bills on time. Problem is our credit score, I just ran a FICO on myself and it was only 624. This is mainly due to me being a lawful permanent resident and only having around 2 years or less worth of credit history in the USA, and also my credit balances are on or about 80%. The credit lines  are very small so I plan on taking care of these ASAP since they appear to be impacting my score. I believe my wifes score is about the same also, due to past medical expenses impacting her figures, she always settles credit balances monthly and pays her bills on time though.
I just wanted to know if I am doing the correct thing, in the sense of saving monies for the downpayment and closing costs. Paying off credit cards with a view to improve score, save monies then once ready get a pre-approval then go view potential homes? We are thinking about a home in the 220-240K range in Pinellas County, FL with an FHA type mortgage. Hypothetical question, would they loan us that much? Thanks for your help and feed back,.
  • September 13 2010 - Largo
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Answers (4)

The best thing to do is to talk to a lender.  They can tell you based on
your current situation (loans, finances, and cash available) what's the next
best move.  For some people, you're better off paying off most of your debt.
For others, it's best to keep your cash for a down payment.  The important
thing is to not do anything until speaking with a professional.  If you pay
an old collection, that can bring your score down since it makes that
collection more recent.
  • September 13 2010
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figure this way
$7,000 income - allowable 43% for debt = $3,010
$3,010 - any and all monthly payments = ______
the monthly payments are items listed on your credit report, your auto loan being one and then each credit card will show a monthly obligation. (you'll have to take your obligations and your wife's obligations)   So add them all together - SO let's pretend that you have $100 total other obligations besides the auto
$3,010 - ($100+970) = $1,940
if would per this above scenario qualify for a mortgage obligation each month of $1,940 which must include Mortgage payment + insurance + taxes + mortgage insurance + HOA dues.
So let's say your insurance and taxes and mortgage insurance and HOA all figure to be $600 a month
$1,940 - $600 leaves $1300 for the mortgage portion
$1,300 mortgage payment equates to abt a $256,000 LOAN (not purchase price - this is loan amount)
What I have typed is all hypothecal and you'll have to get your exact figures to know but this should give you some idea.
ALSO
a big FYI - pay down your credit card balances but do not do not close any credit cards or other accounts.  If you start paying off collections your score might go down instead of up.   Don't do anything with your credit without talking to your mortgage broker lender professional first.
Sincerely,
Celia
  • September 14 2010
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Profile picture for Lelodiskin
If you want to improve your credit score buy something that offers GE credit, or any credit company that reports monthly to the credit bureau. that you have 1 or 2 years to pay for with no interest. Then set the payments up on your computer so each month the payment is made exactly on time. You can make the payment higher so it is paid off by the end of the time allowed. Don't pay if off in full till the end. This should bring your score up.
Hope this helped.
  • September 14 2010
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Profile picture for sunnyview
Zillow has a "how much can I afford?" calculator here based on the basic ratios that lenders use to qualify people for mortgages that might help. There are many helpful lenders on the board that could give you a quick idea, but it might help to run the calculator to see how close you are to the purchase price you are considering.
  • September 14 2010
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