Question: DS and DIL are trying to get a home loan. They were trying to get a Rural 100% home loan which is currently lending at 6%. Their credit score was 610 so they would not get the 6% rate they could have gotten if their score was 620. This would make their rate for the loan 7.75%!
The bank said they advised that they take an in-house loan at 5.75% locked in for 3 years and get the 2 offending items removed from their credit score to pull up their score and then re-apply for a loan in 6 months (please read other post on this group or read below for details on the credit report issue).
She said she could get them in the house for not much more than their 1st year’s insurance payment which is appealing to them as they just had a new baby and their savings are tapped out. Although, I think that if they could find a better lock in rate, they could manage to scrape up money to pay some points if necessary.
My question is that in this time of rising rates, is this really a good way to proceed? At the rate Greenspan is raising rates, they could be looking at a 10% environment by the time they can reapply!
Would it be better for them to lock in for the 30 years at 7.75% and keep shopping or get the 5.75 and wait 6 months to reapply?
Can anyone say how much the $600 in problem accounts on a credit report effects the overall score? Suggestions?
I am reposting the credit report issue that I posted under another thread below:
As I mentioned in another related post our oldest son is in the process of getting a home mortgage loan and had an account of $130 pop up from 1998 that he was not aware of. His wife had a $196 account that she was aware of, but thought had been taken care of from 4 years ago! The loan officer told them that even if they got the accounts taken care of tomorrow that the items would not be removed from the credit reports for six months or either they would not reflect on their credit score for six months! Apparently, there must be six months of bills paid on time to have any effect on your credit score. In this case, IMHO neither account should have been figured into their score as the $130 amount was from someone else charging to son’s account illegally and the $196 account was from DIL’s ex-husband not paying a bill that he was ordered by the court to pay in their divorce. Please see my separate post for more on this and some questions that I hope someone can help with. Thanks.
Answer: You forgot to mention how much the total closing costs are and the cost of the home. They will be paying closing costs twice. That extra $2K or $3K is expensive.
Personally, I can’t imagine going into home ownership with a tapped out savings account. Unless there is an upcoming bump in income, it seems like a recipe for disaster. Almost every home has unexpected problems or required repairs.
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