andrea874

Hey guys,
Anyone have any advice for someone with a very limited credit history, that is trying to get a mortgage? Let me know!

AmerLisa

We are getting a mortgage with no established credit history. Our lender is using alternative credit (rent, utilities, cell phone, auto insurance, all paid on time for a year) Its amazingly easy.

andrea874

Nice! Do you mind if I ask who youre getting the mortgage through?

AmerLisa

We're going through a mortgage broker, so I don't know the company as yet.

fatbrit

You can relatively easily get a mortgage with a credit score between 500 and 850, possibly lower if you use private money. Obviously, the higher the score, the less interest you'll be paying. If you're still resident in the UK, there are other methods outside the US credit scoring system.

The major questions are:
Work history
Income:loan ratios
LTV ratio

fatbrit

A broker with many lenders on the book is often the best bet if you do not fall into the narrow lending boxes of the banks. Surprisingly, they can also work out cheaper.

AmerLisa

I was wondering when you'd show up.

fatbrit

How's it going with yours? Sorted or not?

AmerLisa

Not too bad. We almost jumped ship to the builder's lender (a big bank) but bowed out. The guy we had to talk to was a real twat. He basically said a loan would hinge highly on whether the alternative credit would raise our score or not. I told my husband right from the start that I felt they wouldn't be able to help us any better than the broker we are going through. We will get a good rate and then in a year's time we will look at refinancing to a conventional loan. And the best part is that the closing costs can be tied in with the purchase price. Works for us!

fatbrit

Couple of years of regular mortgage payments together with a longer work history should boost your credit nicely into the prime arena. Also, when you refinance from an FHA to a conventional, you will get some of the upfront MIP back (1.5% of original loan, prorated over 5 years). Against that, you have to factor in the cost of refinancing. A good rule of thumb is $3,000 to $4,000 for the first $100,000 and then $750 to $1,000 for every $50,000 after that. Although lenders will sometimes hide this back in your interest rate if you baulk at high up-front costs.

AmerLisa

She says it won't cost us anything. I think we can trust her. She came recommended by our real estate agent. While that can throw up red flags, we did deal with an established agent through Coldwell Bank. I totally feel comfortable with her. However, my husband wasn't feeling the same way because she didn't know how to tie in the closing costs into the purchase price. But, it was just something she hadn't done before on new construction. Our builder has actually explained things to her.

fatbrit

IMO, it's usually quite good if the realtor and loan officer have a working relationship. The realtor can scream at the loan officer if the loan papers aren't at escrow on time, and if they use them regularly they have plenty of leverage to prise the loan officer off the golf course. Of course, if they're both playing a round together,...

Hiding closing costs from the lender's underwriter is an art rather than a science.

andrea874

Mannn we're gonna have more trouble than I thought. Apparently my husbands credit is in the 620's and I'm nonexistant. My income being as on 1099's for the past six months isnt helpful either.

fatbrit

620s okay. You need a broker you can trust (oxymoron I know!) to run the figures. It'll cost you a little ding to the credit score.

andrea874

Any suggestions? No one we've talked to has been able to help