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A pre-approval question regarding credit scores and income..

I recently got engaged and we are at the very beginning stages of looking for a house - meaning we want to get pre-approved for a mortgage. Neither of us have owned a home before. I have a credit score of 650, which I realize isn't ideal. However, I've started making a good income now ($160k last year) and have been working on improving my credit score. My goal is to get it to at least 700 asap, but I'm not sure how quickly I will be able to do it. I believe my fiancee has a very solid credit score (not exactly sure but well over 700), but her income is lower (around 30k annual). We will have a good amount of cash available for a down payment, between 20 - 30k. What is the best way for us to approach a pre-approval loan? Also, I was wondering if there is a smart way we could take advantage of the first time home buyers 8k tax credit. I realize I don't approve of this because of my income level, but my fiancee does. What is the best way we can approach getting approved for the loan - taking our credit scores, income levels, and the potential tax credit into account? Any suggestions would be much appreciated - as we are brand new to this. Thank you!! by susan184 from Hartford, Connecticut. Feb 15th 2010 Reply

Leo Harvey (LHARVEY)
#6 ranked lender in Pennsylvania - 144 contributions

Hi Susan184: Your 650 credit score does not disqualify you from qualifying for a mortgage. I would suggest an FHA loan in this case as most lenders still approve with a 620 score and guidelines for credit are a little bit less strict as the government insures these loans. Going to a conventional Fannie loan will be a little more challenging as guidelines are stricter. In any case you still should qualify for the tax credit for 2010. The credit will not get you money in your pocket for closing or down payment. It is however a true credit which can be refunded to you in 2011 when you file your federal return.You first task would be to find a lender licensed in your state and submit a pre-approval application which is basically a full loan application without a property identified. The lender will review your credit, income and asset documentation and determine how much you can be approved for. They will issue you a pre-approval letter which can be used with a Realtor to help in your search for a home and your negotiations for the best price.In any case I wish you all the best in your search and start into home ownership.

Feb 16th 2010
Brian Esquivel (NewAZMortgage)
#24 ranked lender in Arizona - 67 contributions

Hi Susan184,There are two ways that you could approach this. First, if you want to utilize the tax credit we would run your fiancee for approval as a single applicant first to see if she can qualify on her own as a first time home buyer. If that doesn't work then we would put you both on the loan application and run it as a joint application for approval. Please log on to my secure site to fill out a complimentary home loan application, National Bank

Feb 16th 2010
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