Buying A Home
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HELP! DH's Credit Score is Killing Us!
I need to vent. We just heard back from our bank today on our pre-aproval. It never crossed my mind that we would not be qualified for the loan we were asking for, for a thirty-year fixed. My credit score is perfect. No problems, beautiful. Turns out DH's credit score is less than perfect, something he hid from me despite my repeated asking before-hand. Apparently, these problems were accrued before our marriage and relationship for that matter, and he "conveniently" skirted around the topic each time I asked him. The bank did qualify us for an ARM at a higher rate. I think these are completely irresponsible, given the current housing market crisis. The bank said DH's score was 20-30 points away from being at a level where we would qualify for the 30-year fixed. Has anyone else had this problem?? And what can we do?! I really can't see us being stuck in an apartment for another few years. Should we take the ARM and hope to re-mortgage a few years down the road? I'm just so upset right now!
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Re: HELP! DH's Credit Score is Killing Us!
I would have a serious problem with H hiding stuff like this from me. Does he have accounts in collections? Judgments against him? You guys need to sit down and figure out a way to get his finances in order.
See what you could qualify for with your own income. If you only use your income, then you only have to use your credit score.
I would not do an ARM either. I'm guessing banks like them now because rates really have nowhere to go but up in the coming years.
I'll only focus on the mortgage issue and not your H avoiding your questions. Can you qualify for the house on your own? My DH has not great credit from some late payments before we met that haven't dropped off yet and my score is much better. With my h being on the mortgage, we'd have a higher interest rate than if the mortgage was only in my name. So I'm the only one on the mortgage and my h is also on the deed.
I would avoid an ARM because the rates aren't that much better than a fixed. Right now, I'd do whatever I could to get a fixed rate mortgage and if that's not possible then rent until his credit improves.
Is there a way to fix these negative things on his report? Can he pay the collections (if he has any) or get added as a user to one of your credit cards if that would help him. These are really just suggestions since you didn't say what the issues were.
I'm going to disagree with SBP. We needed to bring our scores up a little and our lender recommended a credit consulting service. They know the fair credit act inside and out, and they help you dispute what can be disputed and give you tips on what you should do (like paying the CCs down, which boosts your score immediately.). They said one of the worst things you can do is pay off those little collections -especially older ones - because that brings the date on the account current, which hurts you. You're better off disputing them, because if they're old, little, or have been sold so many times that no one has the original paperwork with your original signature on the debt, they usually don't respond and will be dropped off your report.
Anything you can achieve through hard work, you could also just buy.
Anything you can achieve through hard work, you could also just buy.
I would not do an ARM and I would definitely not buy a house until you are 100% sure your DH has been completely honest with you about his finances. When you get to that point, I would meet with a mortgage broker. They can advise you both what you need to do to improve credit score and see what other mortgages are available to you.
I would not buy a house with a man who had lied to me about his finances. Are you sure they're past problems and not still ongoing? If it was all really taken care of and completely in the past, why wouldn't he tell you? I'd be very leery of taking on joint debt with this man. Make sure you see a copy of his most current credit report.
If it was an innocent mistake, see if you can qualify for a house in your name only. You'd only be able to buy as much house as you could afford on your income alone. Luckily for you, Massachusetts is not a community property state, so you'd own that house yourself and he (and his creditors) would have no claim to it if his financial problems continue down the road.
Don't get an ARM. I had one years ago for a property I was only going to have for a short while to flip it. It reset before I had a chance to unload the property. The mortgage doubled and then went up another half before I was able to sell. I can assure you that a mortgage doubling is painful, no matter how affordable it was to start with.
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What you can do in the short term is to pay off any credit cards in his name (to at least no more than 15% of the allowable limit - pay off in full if you can), add to your savings, add to his income, and dispute any negatives on his credit report. Take second PT jobs if necessary to do this.
I would take one year to continue renting and save more and pay off as much debt as possible - then try again.
You can try a mortgage broker and see if they might be able to find a lender who will give you a 30 yr fixed mortgage with his score.
ETA: You may have to pay a higher interest rate if you do find a lender who will accept his score. Do you have adequate income to put the mortgage in your name only?
Hi Everyone-
Thanks so much for the input. Unfortunately I cannot support the mortgage on my income alone. DH and I are both teachers-he in a public school system for 4 years now, I in a private Catholic School. His income is more than double mine. DH's money problems, as he explained to me, occurred right after high school/all through college. Apparently after one year, his college funds had run out. He moved out of his house and his parents would not support him. During this time he wracked up two fairly hefty credit card debts, in addition to his student loans. A couple of years ago, his mother paid off his credit card debts in full and he has been repaying her. He still has $20,000+ in student loans which he is repaying, whereas I only have $6,000. He has not had a credit card since he wracked up his debt. I know that this has worked against him. I am intrigued by what was said, though, about adding him onto my card which I've had for about 6 years and has been paid off in full in each month since I have had it. I am still angry with him that he didn't disclose all of this with me, but hopefully we can work through it. I realize that my house hopes may be put off for some time again, as I really don't want to do an ARM.
Just to clear up a few things here:
Do NOT close lines of credit. The older your oldest account is, the better and the more available credit you have, the better. There are rare occasions where you can have too much available credit but usually that is not the case.
The statute of limitations on debt collections varies by state, but I think six years is standard. Check for your state, but if it's passed that length of time you don't have to pay it and pp is right, you'll restart the clock if you do. If they're within the statute then it's just going to keep adding negative stuff to his credit score and if you want to buy a house anytime soon, that's less than ideal since disputes take awhile.
Using a credit counseling service usually does lower your score. It depends on the type, but usually they make you close your accounts which decreases your available credit as compared to utilized credit. If they settle any of your debt for you (meaning in lieu of lowering the interest rate they lower the amount you owe overall by getting the creditor to take less) this will also show up.
Have you looked into FHA loans or any local programs that might have special programs for teachers who need home loans? I think FHA allows lower credit scores. I would also check with another bank to see if they might consider giving you a loan based on what you know about his score now.
All is not lost, my credit score was about 100 points lower a year ago. Your H needs to get a credit card (capital one will probably give him one) and needs to pay everything on time. Student loans aren't a biggie (I have about three times as much in SL debt as he does) and if you're both paying them on time it's good for your credit history.