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Hey yall, I posted this a while back in the personal finance section and didnt get any responses, so I hope this is more suited here...
I am beginning to look at my first home purchase and have spoken to a realator and broker. I ran my credit with Equifax a couple weeks back and it came back with a 755 score. I saw that there was a collections from a school dating back to 2006 for 450 bucks. I remember disputing this a while back and completly forgot about it. But since my score was 755 I didnt think much of it and was just going to let it be till it drops off.
I just had the broker run my credit and it came back with a 689 credit score from Equifax, 710 from Experian, and 709 from Transunion. I almost fell out of my chair, but they told me when a broker runs your credit it normally comes back with a lower score... Does that sound right?
They told me that if I were to get the collection taken care of a 30yr rate would be 4.25, as my credit stands it would be 4.75. I would be putting about 15% down ($45k), have no debt, and the payments would be managable for me. Do these rates sound decent for my situation? What would be the best route to get the collection taken off my report. I have no issue paying it off to have my score jump. I certainly dont want to end up paying .5 point extra for 30 years.
Last but not least, I received the rates from a local brick and mortar company, is there any negotiation with the rates (I'm barrowing less then I'm elgible for, have plenty in investments, ect.) or would it be worth going with an Internet based company that doesnt have overhead for cheaper rates?
Apologize for any simple minded questions and thanks for looking. I'm looking at a few places this weekend and dont want to fall in love with a place and then not be in a posistion to purchase.
When you run your scores on those online systems, those are not your actual credit scores. They are an estimate, so yes it's very common for the scores to be different. Lenders always use your mid score. 740 is top tier pricing. I would get the charge removed by showing it's not yours, or just paying it and getting a letter from them showing it's been removed. The lender can then pull a rapid-rescore, or you can wait for the next month to roll around and see what happens.
Rates are closer to 4% with the 740+ credit right now, so it makes sense your quoted rate would be higher, but it also depends on what that rate means. Is the rate higher because it's a 90 day lock - guaranteed rate to where you have a couple of months to look for a house and then close, or is it a 30 day lock rate where you need to get a house quick so you can close in under 30 days.
If it's a 30 day lock, the rates seem high. If they're 60-90 day locks, they're probably in line.
When you run your scores on those online systems, those are not your actual credit scores. They are an estimate, so yes it's very common for the scores to be different. Lenders always use your mid score. 740 is top tier pricing. I would get the charge removed by showing it's not yours, or just paying it and getting a letter from them showing it's been removed. The lender can then pull a rapid-rescore, or you can wait for the next month to roll around and see what happens.
Rates are closer to 4% with the 740+ credit right now, so it makes sense your quoted rate would be higher, but it also depends on what that rate means. Is the rate higher because it's a 90 day lock - guaranteed rate to where you have a couple of months to look for a house and then close, or is it a 30 day lock rate where you need to get a house quick so you can close in under 30 days.
If it's a 30 day lock, the rates seem high. If they're 60-90 day locks, they're probably in line.
Thanks
I called up the creditor and tried explaining that its a mistake and the original company even admitted that it shouldnt be my bill. That being said this turned into a process that went nowhere fast. I heard that if I pay it off and they agree to take it off that it still may show up on there for the foreseeable future. Is that not the case? I would love to be able to pay 400 bucks and be done with this if my score will jump in a month or so.
Scores the consumer pulls are never the same scores the lender pulls. I have no idea why the credit industry maintains two separate standards, but I doubt the colloection will have the anticipated results you are thinking, and in fact, can result in even a lower score. Also, one key fact left out is the type of collection. We know medical collections have minimal impact on a score, while a revolving collection can have dramatic impact. When the consumer pays the collection, it brings the collection to a current collection status.......meaning, it appears in scoring as if the collection happened yesterday. For this reason, I advise all of my borrowers to not pay off a collection until the underwriter has approved the file. This way the collection does not effect the pricing (rates) and can be paid off at closing.
As for debate of the brick and mortar vs. the internet company (I call the black hole company), unless your file is perfection itself, you are better off with the brick and mortar company. With a brick and mortar company, you almost always work with the same person all the way thru the file. There's also a good chance the underwriter is on the premises and can approve and close your loan without your file leaving their office. While the internet company, you could be talking to some guy in his underwear, in his mom's basement. (No exaggeration, some big name web-based companies use in-home employee models). But the most important reason.......the web-based company has no skin in the game if they screw up, over-promise and under-deliver. What will you do if that lender is slow to respond? Doesn't respond? Causes you to miss your closing and so on? I can tell you what you would do if it was a brick and mortar lender in your town. You'll be there to talk to the branch manager, your Realtor will be picking up the phone, and you will share your experience with everyone that will listen. The web-based company probably rolls on the floor when a Realtor states they will no longer recommend your company to any buyers or sellers reviewing contracts. But, you better believe, the local lender is most definitely listening......a certain adage comes to mind for this example.
Besides improving your score, a larger down payment will also improve your rate. You'll be paying PMI and those rates and plans vary from lender to lender and can also vary greatly.
As for your qualifications being better than what you could borrow, that is not a price-point for better rates - maybe in the future, but not now. Recently, new regulations went into effect for all lenders. The result has been a more uniform pricing scheme for everyone (probably higher for the consumer). Loan officers use to be able to "cut the price" to win a deal, but that went out the window. Personally, I think the result has been a higher price to the consumer and more pay in the loan officer's pocket. Buyers use to play lenders off each other trying to get the best price. It's now a CarMax model, take it or leave it.
I would recommend you talk to a couple more local lenders, without them pulling your credit Not eveyone needs to pull your credit to quote you a rate. If you hear those words move on to someone else. The loan officer you are talking to is only going to be discussing options they are familiar with. There are literally many different options available.....keep talking.
[quote=SmartMoney;22128425]Scores the consumer pulls are never the same scores the lender pulls. I have no idea why the credit industry maintains two separate standards, but I doubt the colloection will have the anticipated results you are thinking, and in fact, can result in even a lower score. Also, one key fact left out is the type of collection. We know medical collections have minimal impact on a score, while a revolving collection can have dramatic impact. When the consumer pays the collection, it brings the collection to a current collection status.......meaning, it appears in scoring as if the collection happened yesterday. For this reason, I advise all of my borrowers to not pay off a collection until the underwriter has approved the file.
quote]
The lender is actually the one that told me if I get the collection off my report that my scores should all jump above 740. Everything else on my report is perfect, or as good as it can be. I did some quick math and on a 30 year term I would end up paying an additional $36k with a 4.75 rate then a 4.25. Of course the goal is to make additinal payments and I would like to pay enough to get rid of PMI within 12 months, but things typically never go as planned.
If I cant get something closer to 4.0 I will probably pass on purchasing. That being said, would you recommend I call the collection company and pay it off, then cross my fingers that my score does go up in a month or two? Thanks
I went through an internet lender I found through Costco. They were AWESOME! Closed on Halloween with 3.75% 30 year fixed, no points. They were much more accessible than my last refi with Penfed (THAT was a black hole).
The lender is actually the one that told me if I get the collection off my report that my scores should all jump above 740.
1) What kind of collection is it? school or government insured student loan?
2) Which is it, get collection off the report as if it never was there? Or get it showing paid?
3) How old was the debt?
Here's one of the best articles that conveys the point I am trying to make http://tinyurl.com/7cle4h5 (broken link)
I can't speak to what someone else recommended, but there are credit simulators (computer program) available, simulators that will actually give you and idea of the result. At a minimum, I would run your scenario thru the simulator. I'm hoping that's what this lender did for your situation before promising a probable result.
1) What kind of collection is it? school or government insured student loan?
2) Which is it, get collection off the report as if it never was there? Or get it showing paid?
3) How old was the debt?
Here's one of the best articles that conveys the point I am trying to make http://tinyurl.com/7cle4h5 (broken link)
I can't speak to what someone else recommended, but there are credit simulators (computer program) available, simulators that will actually give you and idea of the result. At a minimum, I would run your scenario thru the simulator. I'm hoping that's what this lender did for your situation before promising a probable result.
It was for a community college that I took a few classes at a while back. The amount is for about $400, and I was told it was for a single class. I called the school and they said they had no record of me attending this class or anything. I disputed the charge online and called the creditor, but they more or less said tough luck. It is not showing paid. If I pay this thing off would it help?
The debt is coming up on 6 years old.
Never heard of the simulators, will give that a shot. Thanks!
Scores the consumer pulls are never the same scores the lender pulls. I have no idea why the credit industry maintains two separate standards, but I doubt the colloection will have the anticipated results you are thinking, and in fact, can result in even a lower score. Also, one key fact left out is the type of collection. We know medical collections have minimal impact on a score, while a revolving collection can have dramatic impact. When the consumer pays the collection, it brings the collection to a current collection status.......meaning, it appears in scoring as if the collection happened yesterday. For this reason, I advise all of my borrowers to not pay off a collection until the underwriter has approved the file.
quote]
The lender is actually the one that told me if I get the collection off my report that my scores should all jump above 740. Everything else on my report is perfect, or as good as it can be. I did some quick math and on a 30 year term I would end up paying an additional $36k with a 4.75 rate then a 4.25. Of course the goal is to make additinal payments and I would like to pay enough to get rid of PMI within 12 months, but things typically never go as planned.
If I cant get something closer to 4.0 I will probably pass on purchasing. That being said, would you recommend I call the collection company and pay it off, then cross my fingers that my score does go up in a month or two? Thanks
Are you serious? If you cant get a rate close to 4%...how spoiled we have become.
Also...you will not pay an additional $36,000 with the higher rate because you will not keep this house for that long. If this is your first house, you will probably keep for 5 to 7 years at most. During those years, many things will change such as marriage, increased income, job transfers, etc... Also, the interest is still tax deductible lowering your true interest cost.
Lastly, if you dispute this collection, the credit agency will show on your report item in dispute. lenders will require that you resolve the dispute and get it removed from credit report and your credit must be reran.
Are you serious? If you cant get a rate close to 4%...how spoiled we have become.
Also...you will not pay an additional $36,000 with the higher rate because you will not keep this house for that long. If this is your first house, you will probably keep for 5 to 7 years at most. During those years, many things will change such as marriage, increased income, job transfers, etc... Also, the interest is still tax deductible lowering your true interest cost.
Lastly, if you dispute this collection, the credit agency will show on your report item in dispute. lenders will require that you resolve the dispute and get it removed from credit report and your credit must be reran.
I dont think we are spoiled, its called supply and demand. Nobody wants to buy right now, so they are trying to entice people with low interest rates. Its the current market.
Thats a valid point, but what if I do live in it for 30 years? What if I move out and then rent it out?
The lender did notice that it shows the collection in 'dispute', just not very clear how I can get it taken off the report.
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