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Old judgment and 609 middle score, working on fixing credit but how soon?

My wife and I are wanting to purchase our first house but have a couple hurdles we are trying to overcome. I have a credit score in the 700's but also have most of our debt (auto loan, student loan, credit cards) in my name so cannot qualify for a mortgage on my own. My wife has almost no debt, just auto loan that is current and never late, but a middle score of 609 and an old credit card judgment from 2005 on her report. We are getting ready to pay the remaining balance of the judgment and get a satisfaction of final judgment letter from creditor. She has also gotten approved for an unsecured credit card that we are going to use to build her credit history.What credit score should she be shooting for in order to get an FHA loan with little money down (3.5%)? What should our front-end and back-end debt ratios be near to qualify for that type of loan? Lastly, what is a realistic time-frame to boost her credit score high enough to qualify? by rob_er_792 from Tampa, Florida. Aug 2nd 2011 Reply


Joseph Afonso (jafonso)
#63 ranked lender in Arizona - 197 contributions

You should be able to find lenders that will accept a credit score of 600 and allow a 3.5% down payment they may require lower ratios. Most lenders will require a credit score of 620 and will most likely run your application through DU/LP and that will determine yuor ratios.

Aug 2nd 2011
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Steve Sexton (steve@1800valoans.com)
#37 ranked lender in Washington - 23 contributions

She should have a 620 score to qualify. FHA debt ratios are 29%/41%, meaning 21% of your gross income can go towards your house payment and 41% of your gross income can go towards your overall debt. As far as boosting her score, it will depend upon how long it takes the creditors to report the changes and for them to cycle through the beureaus. The other option for you is to pay off those accounts, get documentation they are paid and do a rapid rescore, which can get the new scores within a few days. Right now, rates are VERY low, and it may be owrth while for you to try to get something done sooner rather than later. Good luck, and let me know if we can be of help.Steve Sexton steve@1800valoans.com 877-376-0223

Aug 3rd 2011
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Tom Stevens (Thomas.Stevens)
#21 ranked lender in Massachusetts - 68 contributions

It sounds like your on the right track.FHA requires a minimum 580 score for 3.5% down but most ls have additional restrictions. A score of 620-640 would be required for the best financing terms and rates.Paying off an old debt will decrease your score temporarily since it brings an old history into the present. Since the credit repositories weigh a lot of different factors in calculating a credit score, it's difficult to tell how long it would take to see sufficient improvement. The best way to estimate that would be through a service such as CrediteXpert which allows "what-if" scenarios and pretty accurately estimates the impact of any action upon your credit score.Front end and back end ratios are set only when a "manual underwrite" is required. If you receive an "approve" grade from an automated underwriting system then your ratios have already been considered and are fine as-is.

Aug 3rd 2011
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