First time home buying conundrum (loan, pre-approved, credit report, loan)

[katertot]

My fiancé and I have poor to fair credit (mine is 630, his is 650), moderate assets (~15k), and a fair debt-to-income ratio (only current debt is 5k balance of a car loan). We were pre-approved though USAA for a 5% conventional 30-yr fixed mortgage for 160k for our first home.

The mortgage consultant (Coldwell Banker) that works with our realtor strongly warned us that he has seen USAA overextend their pre-approvals and almost guaranteed that we would ultimately be denied the loan when it went to underwriting because the minimum credit score needed for any conventional loan is 660.

I have two questions: First, has anyone ever heard anything similar regarding the 660 firm cut-off for conventional loans?

Second, my dad is willing to help us out however possible (short of buying the house). He has near perfect credit and substantial assets. I talked to the same mortgage consultant from Coldwell Banker about using him as a guarantor to which he told me a guarantor and co-signer were the same thing. My understanding is that a primary signer and co-signer share equal responsibility for payments and are awarded equal equity, whereas a guarantor is a third-party that guarantees to pay the loan should the primary borrowers default. Can mortgage loans have a guarantor? If they can, would I theoretically still be denied a conventional loan in light of my less-than-660 score even with a guarantor?

OK.... so that's more than two questions!! We're new to this, it is all so very confusing, and guidance would be SO greatly appreciated! We found a home that we love and are trying so hard to make it work but it's not looking good.

[bonnierh]

I would say go through FHA... their credit standards are lower.

[katertot]

We were approved for FHA, started the process of making an offer when our realtor came back and told us the condo community didn't accept FHA loans, so here we are looking for conventional.

[SmartMoney]

Guarantors do not exist in the mortgage world. You have non occupant coborrowers. They go on title and the loan. You can only use non occupant coborrowers to assist with ratios, never to compensate for credit. Your Coldwell Banker person is correct, a 660 minimum score is required for conventional loans. You would do better right now to withdraw your offer and work on credit scores or find an FHA acceptable property. Does the condo just have an expired approval? Do you know if it is eligible, but just needs updating? Wells Fago will handle condo approvals for the section you want to buy in.

[FromSouthtoNorth]

katertot, I have a few questions, however i do aqree with the previous posts, best thing you can do for youself and your husband is work on the credit scores. Im sure you have a copy of the credit reports for you both. You should have the credit bureaus contact info that for each bureau that reported on your report, I would sit down and find out where you are getting dinged pushing your scores down. Do you have high balances, do you have a lot of debt, do you show late payments that are in the past and still dragging down your scores. This is the area I would work on first, get the scores up and then you wont need to worry about finding a condo thats FHA approved.
You mentioned USAA , are either of you military ? Just curious, that opens another avenue, not for this particular condo, but maybe another property. I would put all the odds in your favor, you'll be way ahead of the game if you fix the credit now before buying. It will save you money.