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Profile picture for Crosbymoto

Would-Be First Time Buyers, Looking for Solid Advice

My partner and I are actively discussing a near-future attempt to approach a bank in hopes of securing a mortgage. We would both be first time home-buyers. The issue that I see becoming a sticking point is basically this : I've just turned 30, and due to an expensive education and student loans mostly, I have a lousy credit score under 600. My income level however, exceeds 75k, which is about double the local median average income per household, I work full time, my employer is in very strong condition financially speaking, my job is stable. Now at the other side of things, my partner who is only 22, has no job or income, but I've helped him to obtain a 700ish credit score that keeps getting better. We are currently renting, however we'd be able to cut our monthly housing expense by about half or even more if we were buying. I am wondering what sort of advice we could be given that might be useful i.e. our being able to obtain a home loan.  
  • March 26 2011 - Inwood
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Answers (11)

Profile picture for CallTheSisters
The advice from Sunnyview is first and foremost.  What looks like a great idea could turn into a nightmare and totally destroy your credit.  Plan on qualifying and buying the home on your own.

There are ways to improve your score.  There are tons of free sites on the internet with self help to repair credit scores.  DO NOT PAY anyone to do it for you.  Getting a score up from just under 600 to 640 is not impossible to do.

 If one borrower has a good score and no income they are not in a position to show the bank they are capable of paying the loan. 
  • March 26 2011
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Profile picture for sunnyview
My advice would be NOT to buy a home with anyone before you are married. It can be a leal nightmare. No one will step up and tell you that before you buy and you may not think about it either. People don't plan to split, but buying a house with someone is a legally binding partnership. With 50-50 interest, decisions about who pays the mortgage and who must refinance to get the other person's credit independent again may risk your good credit score if the relationship goes south.

Do not buy a house with your partner unless you have a buy out agreement drawn up and a partnership agreement that is legally drawn and discusses who can buy the other out and when, who is responsible for paying the mortgage, what happens if one parter dies or is disabled and unable to sign or pay etc.

It is far easier/safer to buy a house that you can qualify for yourself with your income alone here. You do not know what will happen, but financial entanglements are not good for relationships. If you have a good salary, buy a place now that you can keep for a while or that you can rent out for a fair market rent to cover your mortgage. Then if you eventually choose to buy something larger with your partner you will have covered your bases.
  • March 26 2011
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Have you begun paying back the Student loans yet?

It isn't uncommon to see credit scores weighed down by deferred student loans that begin to positively impact your scores once you begin paying them; often times it will take a few months especially if the amounts owed are in excess of the original amount.  OF COURSE we don't know if this applies to you but you certainly need to consult a lender that can coach you along the way..

A potential borrower with no income or means to pay back a loan isn't much help and you ought to focus on building your own score, imo.
  • March 26 2011
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Talk to Wells Fargo about an FHA loan. They are sometimes will to go below 600. If your partner does not have a job, but has debt in his name, that may cause an issue. Call the lender and sit down with him or her to review your specific situation.
  • March 26 2011
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Profile picture for John Paunan
Crosbymoto,
For mortgage qualification purposes, they will actually pull what's called a tri-merge credit report.  This will have the 3 scores from the main credit repositories, the lender will then take the middle score (not the average) of the 3 scores.  When there are co-borrowers, the lender will then use the lower of the 2 middle scores as the effective score for your qualification.  I hope this helps!
  • March 26 2011
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Profile picture for John Paunan
Crosbymoto,
For mortgage qualification purposes, they will actually pull what's called a tri-merge credit report.  This will have the 3 scores from the main credit repositories, the lender will then take the middle score (not the average) of the 3 scores.  When there are co-borrowers, the lender will then use the lower of the 2 middle scores as the effective score for your qualification.  I hope this helps!
  • March 26 2011
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There are many different types of mortgages and various options.  My advice would be to talk with several mortgage professionals to find out what the requirements are for different types of mortgages (FHA, Conventional, etc.).  They are the ones who keep up on all of that information, which changes daily. 
  • March 26 2011
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Profile picture for Crosbymoto
Therein lies the problem - I have already hired a credit repair firm, Lexington Law, who has managed to get my score up, but my score stinks because of the nearly $100,000 of student loans - they do show up as being current, but besides that I only have 1 credit card, with a low limit, and almost 18 hard inquiries weighing down my score. But because my partners score is so much better than mine, I was going to add myself to his cards as an authorized user, which is what I did in reverse, added him to mine, to get established credit. How does a bank weigh out two people's credit scores? Do they add them up, divide by two and that's their number? Or, is it done differently? Will it be hard to get someone to overlook my score for his, and his lack of income for my great income?
  • March 26 2011
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Profile picture for Sharon Lewis
I would suggest you find a great Realtor and ask them to recommend several loan officers.If you need a referral for a realtor in your area, click on my name and email me. Once you find a loan officer you feel you want to work with,  sit down with your choice and find out how much you can qualify for to purchase a home. Its really that simple....so wonderful to hear you are heading down the road to home ownership...you will love turning the key and opening the door to your very own house!
Good luck to you!
  • March 26 2011
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My advise would be to talk to a couple of lenders and find one your comfortable using. Maybe even ask some of your friends who they used as a reference. Different mortgage pro's have different products and one may work for you,
I
  • March 26 2011
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Well, you're about 2/3 the way there.  You have to have all 3 criteria to qualify in today's current Market, which I don't anticipate changing anytime soon.  Because you have the stable income and have the assets, then I'd work on repairing your credit.  You will want to view your credit report to verify exactly what is keeping your fico (make sure whatever credit score you're being offered, that it's the fico score -credit companies are creating Marketing gimmicks that are confusing consumers with other various types of credit scores) score low.  You can go here to get a copy of your free annual credit report.  It doesn't provide you with your fico scores, but you can pay to see them.  You will want to make sure there is no derogatory reporting against you, like liens, judgments, late payments, etc...  Without viewing your credit report, then it's too difficult to advise you exactly  what to do to repair it.  But I'd suggest viewing your credit report and make sure what type of credit history is being reported on your credit report.  Also, make sure there are no accounts being reported against you that don't belong to you.  Sometimes there are mistakes by people with similar names or a SSN was transposed to match you and you receive the negative reporting on an account that doesn't belong to you.  There are a lot of good, honest credit repair companies (a lot of bad ones too).  If you need any assistance with a referral here, then I'd be more than happy to offer you one.
  • March 26 2011
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