Real Estate and Home Mortgages - credit score questions

I'd like some advice on how the credit score works. I'm trying to help my youngest son purchace a house. The loan will probably need to be in my name since my son has no credit score. Mine is 779. I knew it wasn't the best because of the info the insurance company supplies every year at renewal.

We were unable to secure a loan at the bank [50k] and are now the into the 2nd week with a mortgage company. The bank loan fell thru because their appraiser was unwilling to go more than 10% above the tax appraisal which doesn't yet reflect the new value [gutted and remodeled]

Negative factors on my score:
too many consumer finance company accounts ????
too many inquiries last 12 months
length of time accounts have been established
porportion of loan bal to loan amounts is too high ??
inquiries impacted the credit score

I have a car loan and a mortgage on rental property. I use my credit cards extensively but pay off the balance every month. I'm a co signer on my stepson's mortgage. All accounts in good standing.

The current loan they are working on is 8.5 % :eek: but the main thing is to complete the deal soon!!! We are purchacing the property from my wife's brother for about 10-15k below market value but he wants to close now! This deal was started over 3 weeks ago and will probably take another 3 weeks to complete. Is there anything I can do to speed up or otherwise expedite the loan - other than finding more $s for a larger down payment. He's paid $1000 cash + $4000 mobile home and has about 3k for closing costs. I can help a little but not a whole lot.

Are you sure you meant 779? 800 is the highest you can get, which means lenders should be beating a path to your door to loan you money.

>too many consumer finance company accounts ????
>porportion of loan bal to loan amounts is too high ??

You have too many open lines of credit, your _potential_ debt is too high, and you still owe too much on the loans you have.

>too many inquiries last 12 months

self-explanatory, creditors see this as you are trying to live on credit, getting as many credit accounts as you can, regardless of the limits.

>length of time accounts have been established

You haven't had the accounts long enough to establish a payment history that is satisfactory, at least two years of on-time payments is needed for that.

>inquiries impacted the credit score

Again, it looks like you are just trying to get as much as possible.

Inquiries for specific purchases in a given time frame (usually 30 days) are usually counted as one inquiry, such as for car loans or mortgages, because lenders know you need to shop around. Credit cards and personal loans on the other hand, count every time.

779 is just fine.
800 is not the highest score for mortgage lending credit reports. I've had many borrowers over 800.
Transunion goes to 843
Experian goes to 850
Equifax goes to 850

Some consumer scored reports might go higher or lower, but those are not the scoring systems used by mortgage lenders.


If your son has NO credit score, as in NO credit--a blank credit report, he could still qualify for FHA financing with manual underwriting and alternate credit sources. This is easiest when the borrower has been renting and has utilities in their name. Some examples, you'll need about 4 sources:

1-Rent
2-Power bill
3-Cable bill
4-Phone bill
5-Auto insurance (health insurance maybe, not always accepted for some reason)
6-Healthclub membership payments
7-Monthly membership fees to work related organizations
8-Water bill

Be creative. You'd be surprised what can be accepted as long as it's regular and has been in effect for a couple of years. I had a guy use fees to his martial arts instructor once. You have to show the money coming from his account and that they have been paid on time.
This will also establish credit for him. Rarely does having a relative finance something for you go well.

Ignore the negative factors on your score. Even if you had an 820 you'd have items listed there (literally)--they have to have items listed. Your credit is just fine. It looks like you're buying the house as investment property, so you won't get the rate you would for a home.

"I have a car loan and a mortgage on rental property. I use my credit cards extensively but pay off the balance every month. I'm a co signer on my stepson's mortgage. All accounts in good standing."

I wonder if your loan officer is taking these debts off of your budget? Provide them with 12 months cancelled checks from your stepson and these 2 debts can be removed---he must be on these loans though. Give them a copy of the notes from these debts to show this.

You may be having trouble due to not being an arms-length transaction--buying from a relative. Might not have been caught due to the relationship here, different last names (I assume).

"He's paid $1000 cash + $4000 mobile home and has about 3k for closing costs."

Where did a mobile home come into this? Is that something else he's bought, or is this a mobile home we're talking about? Is he selling a MH and you mean this is a source of funds for closing? If this is a MH, then take whatever rate you can get. Those are almost impossible to get financed these days.

My son paid $1,000 cash and his mobile home for a down payment. He bought the MH used 6 yrs ago, it's paid for and sets in a MH park/lot. His uncle is currently living in the MH and my son in the house he's buying.

The mortgage broker said today that he needs a 'trade line report' from 3 companies - utilities, etc. and he might be able to get the loan in my son's name. Apparently the lenders consider this to be investment property if the loan is in my name even though my son will occupy and the deed will be in his name. Supposedly if the loan is in my name and because my son has a higher income than me, that creates another set of problems :confused:

I've had my discover card for over 20 yrs and have always paid it off each month except for maybe 1 or 2 times. There is about 2 yrs left on my wife's 5yr car loan. I have a couple of inactive business accounts. I also have a seldom used sear's master card. The 5 yr loan on my rental property is about 1/2 paid. I think my stepson's mortgage was for 12 yrs [land & MH] and I cosigned about 3 yrs ago. Unless mistaken that is the extent of my open accounts. Neither of the loan officers have asked anything about my budget.

Changing gears to my auto ins policy, they say I can't get the best rate because of my credit score. Inquiries to them about this [and their run around answers] lead me to believe that they think I don't owe enough money :confused:

I appreciate all the input. I'm still confused but I guess I'll get it figured out or the loan/sale will get finalized and I'll quit worring about it :D thanks again for your help.

Try this with your son alone, not cosigning. It's more work, but it will be worth it.

There's not much to getting these tradelines put on a credit report:
Loan officer gets the name of a contact person and phone number at each place to be verified. He/she calls their credit reporting agency and gives them the info. They call and verify it. They send an updated credit report with the tradelines. VERY easy to do. Usually have these back the same day, depending on how fast they can get the verifications. Usually easiest with auto insurance since they can call the agent. Utilities might be harder, but then they will often fax a payment history that can be forwarded to the credit reporting agency.

There's nothing wrong with your credit. The insurance company probably has a "best rate" that is next to impossible to get. Keep shopping around, they can be pretty different from place to place. They'll have different guidelines for what they look at. They may want a certain number of tradelines on your credit, or who knows what. Keep shopping. The problem isn't you.

My son didn't get a chance to get his trade line reports today :( - they've had him super busy at work including overtime. Hopefully he can get it done tomorrow - surely they won't work him thru lunch 2 days in a row :eek: :D

Thanks for explaining the insurance deal. I'd be suprised if I can get cheaper insurance than what I currently have thru AARP. They were 25% cheaper than Erie which was 50% cheaper than Allstate [and I had them for 25+ yrs] Although I was aware that credit scores impacted your insurance rate, Hartford was the only one that ever included something about it with the policy rates.

Well we finally got to close today :D I was suprised that the interest rate was going to be so high, 8.5% :eek: but figured anything to get the deal finalized. He's buying way under market value and we couldn't make my brother in law wait longer. I was shocked during closing to find out that they had switched it to variable rate :mad: :wall: It is locked in for 5 yrs but I always thought variable rates were lower than fixed rates :confused:

I'd have never believed it would have taken 2.5 months to secure financing and be such a hassle, especially for a loan that is for only about 60-65% of the home/land value. They did say it would have went better if he had had bad credit instead of no credit. But at least the deal is done and life can go back to normal. We'll wait a year or so until his credit gets established and refinance!!

"They did say it would have went better if he had had bad credit instead of no credit. "

Wow. I'm sorry you got stuck working with these people. I wouldn't have gone with the ARM either. There's just not much difference in rates between that and the fixed these days. It's just not worth it. I hope they didn't stick him with a pre-payment penalty. That rate is up there. I think he could've just gone FHA with alternative credit and been done with this a long time ago, with a good rate to boot.

"We'll wait a year or so until his credit gets established and refinance!!"

This is very unfortunate. These people have cost your son, and will continue to cost him, a lot of money due to what sounds like a lack of information. Unless there are other factors you aren't mentioning, your son could have used alternative credit, gotten an FHA loan in the low 6% range (when you started all of this), a fixed rate, and the mortgage would have established his credit.

Now, he's got an ARM, a high interest rate, he has to plan on refinancing ($$$). And talking about establishing credit with other debt too? He's already gone into excessive debt due to that interest rate. This is just a situation that has gone badly. There must be other factors at play here or this would not have been necessary.

Ya, this is the biggest mess I ever got into :wall: Apparently I could have gotten a good rate providing I moved into the house [I have a home and no interest in moving] For what ever reason I've had the bad luck to deal with all the wrong people. My son's bank would only loan 44k since their appraiser was stuck on the old tax assesment which didn't reflect the gutting and remodeling. They wouldn't consider any loan using my son's lack of credit. A loan in my name would be considered an investment deal. They sent us to a mortgage broker :eek: :wall: I would never have considered a variable rate so I guess that's why they didn't tell me until during the closing.

We hit one dead end after another with the tradeline reports. Neither his auto ins or mobile home insurance would provide a tradeline report [format] that was acceptable by the lender. Same with cable. Telephone and electric came back with excellent tradeline reports.

If it wasn't for the fact that the deal needed to be closed asap, I'd have told them where to jump and stick the loan. I know that when we refiance in a year [you do need to wait 1 yr, right?] that he will basically have thrown away a yrs worth of payments but atleast the payments should be significantly lower. The good news is the deal is done, he's living in a nice home with payments lower than what any of his friends pay. .... and when he refiances there won't be any pressure to get it done asap.

btw - the day after closing I recieved a packet of papers that were "imperative they be signed and returned before closing" I called and they must be signed and returned but they want me to put a date on them prior to the closing date.

Sounds like you just got your Good Faith, TIL and other disclosures. Those are supposed to be sent out within 3 days of appplication. Odd that this got approved without having those. I operate as a mortgage banker but also a broker in some situations. I don't have any lenders that will consider a loan for underwriting without showing these with my submission. It could be that the lender they used sent their own copy out, that happens too and is ok.

There's nothing wrong with working with a broker instead of a bank. Each has their strengths. In this case, you got the loan done whereas the bank couldn't. Often the rates are better for typical loans with a broker. A bank may have better products for construction loans, much better HELOC's (I just send my clients to a guy I know at a local bank), more lenient on 15 year and shorter mortgage...but otherwise mortgage bankers and brokers are the way to go. You still have to do you homework, shop around and find the right person to work with. Like any industry, there are those looking to make more than is reasonable, so you have to shop around.

For accumulating items for alternative credit, I have our credit reporting service make contact with utilities etc and actually add them to the credit report. That is what is preferred by lenders, rather than payment history records from each utility.

The only real reason to wait to refi is to give your son time to establish his credit history with the house note, so yes, 12 months is good. Double check to see if there is a pre-paymet penalty associated with this loan. You don't want to mess with that.

Thanks for the info. I made sure at closing that there is NO prepayment penalty. Had this not been an incredibly good deal from a relative that needed the money fast [and it wasn't as fast as I promised :o] I would never had agreed to the deal we got from the mortgage company.

But atleast the headaches are over :cool: and when we refiance later, we can take our time, get a decent deal and maybe I won't have to cosign :D