not quite ready

iVillage Member
Registered: 04-21-2004
not quite ready
6
Wed, 12-01-2004 - 7:23am

ok, so I told you all yesterday that I was talking to a mortgage broker about possibly getting a mortgage in a month or two.. I was basically calling to get info and see where we should be financially when we apply. Well, the guy wants us to apply now! I just don't feel comfortable applying when we have this much debt(i don't expect to be debt free, but I want some of the burden gone). I told him we will have 5k coming in this month from dh's 401k, christmas money(his parents and family always send us money, which we usually just blow on crap!), and also money from the items we put in the auction last week (wont know that total until sat) and told him we planned on putting that money on the debt to improve dh's credit score and maybe get a better rate. this is what he told us:

1. he said not to pay the debt right now, to save the money and keep it in the savings.
2. he said to keep the debt for now. He wouuld get us a mortgage with a "not so great" rate and then in one year we would refinance and take that money to pay the debt off. he said "just don't pay late on your mortgage, the other things can fall behind, but not the mortgage then you can just take the refinance money and clean everything up".
3. he also said that dh has a- credit...

now my questions are... why not just take the money we have coming in and pay dh's debt down and improve that score? wouldn't that be better in the long run? i mean all this money is coming in in the next month or so, so why not take care of that first? we don't have to be out of our house until the end of march, so if we apply in mid-january and get preapproved(which he said we can already do...so why not later?) that gives us two month to find a house and settle. (we may have to live with my parents for a month or so, but so be it)

doesn't it sound as if he is rushing us into it? Someone else i spoke to said " he works off commission, so why would be push you if he didn't think you could get the mortgage?"

i don't know, I am so confused.. I am going to post this on the real estate board too, just wondering your thoughts..

kel

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Wed, 12-01-2004 - 8:05am

"now my questions are... why not just take the money we have coming in and pay dh's debt down and improve that score? wouldn't that be better in the long run? "


I think so.

All my best,
Danni

iVillage Member
Registered: 03-27-2003
Wed, 12-01-2004 - 8:15am

Hmmmm... I don't like the sound of this guy. You know I'm one of the ones who was all for saving for a house, but his reasoning to buy right now sounds shady. It is not so simple to "just refinance" in a year--there are costs associated with refinancing, major costs, that might not even be justified by your savings in interest rate. And if interest rates go up in the mean time, you may not save anything at all by refinancing.

Besides, if you can get your husband's credit score improved quickly (by disputing items and cleaning up the other stuff, for instance), it might be only a matter of months before you're ready for an improved interest rate.

Also, this whole thing about "a-" credit rating. It's all relative--it reminds me of drink sizes. You can't buy a "small" drink any more--it's all large, extra large, and super large. Who knows, his ratings might be "a-" "a" "a+" "aa" "aa+" "aaa" and "aaa+". I'm not saying your dh's credit is that bad--just don't let this guy's labels mislead you. The scores you described (mid-500's and 600's, if I remember correctly) are *not* good scores. I don't say that to get you down. My dh's was in the mid-600's when we started talking to mortgage brokers. We were told to improve our score before applying since we had plenty of time. Remember that the guy you're talking to only makes money if he sells you a mortgage, so take everything he says with a huge grain of salt. Also, call other brokers.

The other thing that bothers me about this guy is his telling you to let other stuff fall behind but keep paying on the mortgage. Okay, it is true that once you have a mortgage it should be your first priority for payment, since losing your house could easily be the worst financial mishap to befall you ever. But your other creditors can cause you a world of hurt, too, and your credit score suffers when you fall behind. And it's your credit score you're supposed to be fixing.

The one thing he said that *does* jive with what I know is about saving your money. No matter how you cut it, you will need some cash to close on your house. And you will not be allowed to borrow that money. You must have some savings or it's simply not workable (I guess there are some new home builders who make it possible, but this is the exception). Banks like to see that you have a saving habit. They don't really care whether you are carrying some debt (they don't want it too high, obviously, but some is not a problem). They *do* care whether you are carrying a bank balance. What we did was we created a budget based on what our estimated mortgage payment would be. This involved toning down our debt repayment some. Then we took the difference between our estimated mortgage and our actual rent payment, and put that aside each month. This had the additional benefit of getting us accustomed to our new budget before we were in too deep.

I strongly suggest calling another mortgage broker and getting a second opinion, and also talking to at least one direct lender (a bank you already have a good relationship with is a good place to start). I still think www.goodmortgage.com is a good place to start. They were very helpful to us and never tried to rush us.

I know another part of this must be that it's awfully tempting. You want to be in a new home! Just hold on. Better times are coming, but if you're patient, they'll be better than you ever dreamed.

Blessings,

Heather

iVillage Member
Registered: 04-21-2004
Wed, 12-01-2004 - 8:18am

Thanks Danni, I think so too. I hadn't thought about what you said about us being able to go anywhere once his credit improves, you're right! the guy is panicking! He makes his money off of people who have bad credit! so if we improve our credit, we don't need him! I just thank goodness for this board, because a few years ago(before i was educated about debt) i would have jumped at this offer of a house. Now, I can look at things more clearly and really see what we need to do!

kel

iVillage Member
Registered: 05-23-2004
Wed, 12-01-2004 - 10:58am

You've gotten some really good advice here.

I totally agree. This guy sounds shady to me.

Don't jump at this. Improving your credit is a much wiser decision.

You will get a house! And, you want it to be a home . . . not a financial mistake :)

Hang it there, if you're not ready don't let him push you into anything.

iVillage Member
Registered: 06-18-2004
Wed, 12-01-2004 - 10:58am

I would run from this guy. I don't know much about mortgages. DH already had his when we got married, we sold that house and haven't bought one since. Haven't needed to, DH is in the military and we have lived in quarters or apts since then.

However, what struck me is when you said what the mortgage broker was saying didn't sound quite right to you. Trust your gut instinct. I don't know how many times that instinct has saved ne from making a bad financial decison. And Dani is right, once your credit is cleared up, you will be able to qualify with other lenders and he won't make money off of you and that's what he wants.

Good luck.

Kellie

iVillage Member
Registered: 02-25-2004
Wed, 12-01-2004 - 4:12pm

Ok, I'm a mortgage broker and this guy is just trying to get a commission check sooner than later. First, don't ever be late on anything. Yes, it is true that the mortgage lates would hurt more than smaller credit cards, etc, but any lates can seriously damange your credit. Secondly, the more money you can put into the loan instead of financing through the loan the better. The others are right in saying there are a lot of costs associated with refinancing, so to refinance in a year would not be cost efficient.
The only thing thing I have a small problem with is the paying some things off or down to improve your credit. Yes, paying things off or down will help your credit, especially if you are maxed out on cards, but credit scores take awhile most the time to improve more than a few points. So don't rely on that to improve your score for a better rate. Also, if there is anyway you can afford to keep renting until you do buy a house, do so. If you move in with your parents, the bank that loans you the money will insist on a 12 month verification of rent in order to get you approved. If you have either a) moved around a lot or b) have a private verification of rent, like your mother, sometimes they will turn down the loan. Renting from management company is best. I know I'm rambling so if you have any questions, feel free to ask me.

gidge