Hi all,
I'm hoping for some direction/advice on our situation. My partner and I moved to the US in October 2019 so our credit scores despite being in our 30s effectively had to start from zero. We've been working on bringing them up but they continue to hover around 680-low 700s. Length of accounts and recent credit checks are the main issues it appears. We are dual high income individuals so we pay credit cards in full and aim to keep credit utilization <30% prior to closing date on the accounts
In December 2020, we bought a house valued by the bank at $689,000 with 10% down (we had both just started work so didn't have huge savings yet). We struggled to find a mortgage lender because of our credit score issues and the amount we were putting down. We ended up with a 30 year mortgage with a rate of 4.375% (we do not have PMI but the way the lender explained it was that the PMI was effectively rolled into the rate causing it to be higher). Our closing costs also seemed quite high. We required a jumbo loan based on the amount we borrowed so I am sure that affected the rate as well.
I have tried some of the mortgage calculators and haven't quite been able to find one specific to our situation so I wonder if anyone has recommendations for a website to try. We are considering refinancing to get a better mortgage rate and are happy to put more down (eg doubling the downpayment to 20%). I guess I am just trying to get an idea if that makes sense or not - we only plan to be in this house about 5 years, so I worry the math isn't in our favour. Hoping to avoid unnecessary credit checks by starting inquiries with lenders so any advice would be much appreciated!
Also, all the mortgage lingo is new to me - I am trying to learn by reading online but please let me know if what I'm saying makes no sense or if more info is required and I will edit my post accordingly!
Mortgage refinance advice
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Mortgage refinance advice
Last edited by ozziecat89 on Sat May 15, 2021 2:56 pm, edited 1 time in total.
Re: Mortgage refinance advice
Have you looked at the refinance mega thread here on Bogleheads? viewtopic.php?t=289559
I would read through that and look for no-cost options to see if they would make sense for you since you plan to be in the house for five more years.
I would read through that and look for no-cost options to see if they would make sense for you since you plan to be in the house for five more years.
Re: Mortgage refinance advice
Work on your mortgage scores. Forget about any other FICO score.
You need more than the ability to pay off your credit cards. You need to actually do it. And it’s not good enough to PIF at the due date. Do it before statement cut date. Can you reduce your credit card balances immediately to zero except for one card with a small $10 balance? It sounds like you can but you need to do it. After you do this, do not let your credit cards report anything other than zero except for the single small balance. That’s the biggest thing you can do to raise your mortgage scores.
You should stop credit seeking behavior a year before applying for a mortgage if you need every last point. Not having that last fico mortgage score point could cost you thousands.
You need more than the ability to pay off your credit cards. You need to actually do it. And it’s not good enough to PIF at the due date. Do it before statement cut date. Can you reduce your credit card balances immediately to zero except for one card with a small $10 balance? It sounds like you can but you need to do it. After you do this, do not let your credit cards report anything other than zero except for the single small balance. That’s the biggest thing you can do to raise your mortgage scores.
You should stop credit seeking behavior a year before applying for a mortgage if you need every last point. Not having that last fico mortgage score point could cost you thousands.
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Re: Mortgage refinance advice
Thank you, that's helpful.
We had been paying accounts down to <30% right before the statement for the month ended, and then paying in full prior to the due date. We had read that you want to have some utilization but less than <30% (as in it wasn't good to have zero dollars balance on the credit cards at closing) - but that sounds like the opposite of what you're saying...
Also, when you say mortgage scores, what are you referring to specifically? Better.com mortgage says they use Experian FICO 2...is that the typical mortgage score?
We had been paying accounts down to <30% right before the statement for the month ended, and then paying in full prior to the due date. We had read that you want to have some utilization but less than <30% (as in it wasn't good to have zero dollars balance on the credit cards at closing) - but that sounds like the opposite of what you're saying...
Also, when you say mortgage scores, what are you referring to specifically? Better.com mortgage says they use Experian FICO 2...is that the typical mortgage score?
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Re: Mortgage refinance advice
Check out bankrate.com and the lenders mentioned in the mortgage refi thread. 4.375% is really high. You should be able to get a much better rate, probably in the low 3s and maybe even high 2s, once your down payment is >= 20%.
I don’t think your credit score is holding you back that much. Low 700s is pretty good. You probably got killed on the first mortgage due to the low down payment.
I don’t think your credit score is holding you back that much. Low 700s is pretty good. You probably got killed on the first mortgage due to the low down payment.
Re: Mortgage refinance advice
It's not good to have a zero balance on all your cards; this suggests that you aren't using them, and thus that they aren't evidence you can manage debt.ozziecat89 wrote: ↑Sat May 15, 2021 2:59 pm Thank you, that's helpful.
We had been paying accounts down to <30% right before the statement for the month ended, and then paying in full prior to the due date. We had read that you want to have some utilization but less than <30% (as in it wasn't good to have zero dollars balance on the credit cards at closing) - but that sounds like the opposite of what you're saying...
But failing that, the lower the balance, and the fewer cards it is on, the better (except for quirks when you change scorecards). If you get a credit score with reason codes, you will see things such as "ratio of revolving account balances to credit limits is too high", "amount owed on revolving accounts is too high", or "too many accounts with balances" as the reasons your score is not higher. My mortgage lender gave free access to its score, so I could see that my score dropped 10 points when I had balances on all three of my credit cards, (reason "number of accounts with balances") compared to only two (no balance-related reason code).
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Re: Mortgage refinance advice
I would advise you to go to Aimloan.com. You can put in your housing and credit information without giving out personal information. They will give you various quotes. Look for the one where you pay no closing costs and see what the rate will be. I have a feeling in the current rate environment and with your credit scores you will be hard pressed to make it feasible given you will be in the home less than 5 years. Use the mortgage professor refinance calculator. It will show you if it makes sense.
If you do decide to move forward then get at least two online quotes, local bank and credit union, one broker, and a few national lenders (BofA, Wells, JPM Chase, etc). Look for the best rate and closing cost combination. If anyone asks to pull your credit just say no. They can provide a quote without pulling your credit. Play one against the other to get the best deal possible.
If you do decide to move forward then get at least two online quotes, local bank and credit union, one broker, and a few national lenders (BofA, Wells, JPM Chase, etc). Look for the best rate and closing cost combination. If anyone asks to pull your credit just say no. They can provide a quote without pulling your credit. Play one against the other to get the best deal possible.
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Re: Mortgage refinance advice
Thanks so much, I appreciate the advice!