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House Mortgage Question
Posted on 4/10/24 at 9:31 pm
Posted on 4/10/24 at 9:31 pm
Here’s the scenario:
Mid 20’s couple married with one kid. Both work. They live in apartment $1500 month. They looking to buy a house but he has no credit but she has great credit. He just never owned a credit card or gas card. Bank says get some credit for him and come back in a year. They are putting 20% down on a starter home.
I know things have changed a lot since I bought a house but they are paying $1500 month plus they putting down 20%. I told them to shop around but is this common to not give the loan when one spouse has no credit? I mean they have no problem paying $1500 month for the apartment rent. They make about 80k-90k combined
Mid 20’s couple married with one kid. Both work. They live in apartment $1500 month. They looking to buy a house but he has no credit but she has great credit. He just never owned a credit card or gas card. Bank says get some credit for him and come back in a year. They are putting 20% down on a starter home.
I know things have changed a lot since I bought a house but they are paying $1500 month plus they putting down 20%. I told them to shop around but is this common to not give the loan when one spouse has no credit? I mean they have no problem paying $1500 month for the apartment rent. They make about 80k-90k combined
12
Posted on 4/10/24 at 9:38 pm to Double Oh
I don’t know how common it is but this happened to us too. We had to put our 1st house in my wife’s name because I had no credit. Her parents even had to co-sign on the mortgage
This post was edited on 4/10/24 at 9:40 pm
Posted on 4/10/24 at 9:50 pm to Double Oh
It's been a minute, but FHA and USDA had ways to supplement credit in the past (rental payment history, utility bill history, cell phone history).
They weren't the best loan products, but they were available.
They weren't the best loan products, but they were available.
Posted on 4/10/24 at 10:42 pm to Double Oh
There are still banks and loaning institutions that do manual underwriting for mortgages and don’t require credit scores.
Do some searching in the area.
Dave Ramsey used to endorse Churchill Mortgage as an option
Do some searching in the area.
Dave Ramsey used to endorse Churchill Mortgage as an option
Posted on 4/11/24 at 2:09 am to masoncj
quote:
Dave Ramsey used to endorse Churchill Mortgage as an option
As much as I am a fan of a Dave principles, hopefully Churchill Mortgage was not like the Timeshare Exit company he was advertising. Some people were scammed and I think there is a class action suit. Now that the company is gone, the attorneys representing the victims are looking to go after Dave too.
Posted on 4/11/24 at 2:11 am to masoncj
Correct he did endorse Churchill don’t know if he still does or not.
Just kind of perplexed if a couple can afford $1500 rent then why can’t a bank see that they do pay and wouldn’t have a problem paying a mortgage note. We talking a house less than 200k with 20% down .
Just kind of perplexed if a couple can afford $1500 rent then why can’t a bank see that they do pay and wouldn’t have a problem paying a mortgage note. We talking a house less than 200k with 20% down .
Posted on 4/11/24 at 7:19 am to Double Oh
quote:
Just kind of perplexed if a couple can afford $1500 rent then why can’t a bank see that they do pay and wouldn’t have a problem paying a mortgage note. We talking a house less than 200k with 20% down .
Agree. I think banks should take that in consideration. It doesn’t report on their credit report but there is a proven track record showing they can afford that type of payment and it is paid on time. Even at 7% interest on a house 200K with 20% down, their payment could be lower than $1500
Posted on 4/11/24 at 9:06 am to Double Oh
Our house and both our vehicles are currently in my name because my wife has shite credit, for no particularly alarming reason.
The lending agent advised me to only put my name on the application, however we still submitted tax returns and verifications for both our incomes during the underwriting process. Both of our incomes were included but only my name was on the application, so only my credit was run.
Granted, my debt to income ratio was always well below average.
The lending agent advised me to only put my name on the application, however we still submitted tax returns and verifications for both our incomes during the underwriting process. Both of our incomes were included but only my name was on the application, so only my credit was run.
Granted, my debt to income ratio was always well below average.
Posted on 4/11/24 at 9:13 am to Double Oh
His parents could probably add him to a credit card or two and he'll get their credit history for those accounts.
My parents did this with a gas card and my oldest account on my report is from when I was 3-4 years old
My parents did this with a gas card and my oldest account on my report is from when I was 3-4 years old
Posted on 4/11/24 at 9:27 am to Double Oh
Not certain if they have the time or the patience; however, there is a program out there that's really good for first time home buyers. A full point is taken off of the interest rate and there is no down payment required.
I used them many years ago for my first home; however, there is a process. They use the current rent as a baseline to determine current home affordability. Any delta b/w the two they advise having 6 months of that in the bank. Given the 20% mentioned, I don't see how they won't have that.
Program is NACA.com. Not sure if there is an office in their location, but it's worth a look.
I used them many years ago for my first home; however, there is a process. They use the current rent as a baseline to determine current home affordability. Any delta b/w the two they advise having 6 months of that in the bank. Given the 20% mentioned, I don't see how they won't have that.
Program is NACA.com. Not sure if there is an office in their location, but it's worth a look.
Posted on 4/11/24 at 9:56 am to Double Oh
How about using a FHA loan and putting less down?
Establishing credit is almost a necessity and should be done immediately IMO.
If you’re capable of buying a house on one person’s credit I would do that. It makes buying a second house later that much easier. My wife and I own multiple houses, but have never used both of our credits on any one mortgage. Same with vehicles. We have a commercial loan that we are on together but that is it.
Establishing credit is almost a necessity and should be done immediately IMO.
If you’re capable of buying a house on one person’s credit I would do that. It makes buying a second house later that much easier. My wife and I own multiple houses, but have never used both of our credits on any one mortgage. Same with vehicles. We have a commercial loan that we are on together but that is it.
Posted on 4/11/24 at 10:01 am to Double Oh
quote:
Just kind of perplexed if a couple can afford $1500 rent then why can’t a bank see that they do pay and wouldn’t have a problem paying a mortgage note. We talking a house less than 200k with 20% down
I feel like historically a mortgage has been lower for most people than a mortgage. It always seemed to me that the barriers to home ownership didn’t take into consideration yearly rent affordability. Owning a house has more costs over a longer period of time than just a monthly number.
Posted on 4/11/24 at 10:15 am to Double Oh
Is his name on the apartment lease? If so, wouldn't that provide details of credit for him?
Posted on 4/11/24 at 10:36 am to Double Oh
When you're renting and the water heater bursts or the a/c goes out, the landlord foots the bill.
When you're the owner, you pay for these things on top of your mortgage payment. Yes, you could get a home warranty to help, but it's still primarily your responsibility.
So, the $1500 in rent is maintenance free. No add ons. If your mortgage is $1500, you need to be able to afford the maintenance or else you end up cutting somewhere (and that could be on the mortgage payment). Without any credit record, they don't know where you'll cut.
Believe me, I think it sucks for responsible individuals. But I believe this is the thought process behind it. They don't really know how responsible you are based simply on a $1500 rent payment.
When you're the owner, you pay for these things on top of your mortgage payment. Yes, you could get a home warranty to help, but it's still primarily your responsibility.
So, the $1500 in rent is maintenance free. No add ons. If your mortgage is $1500, you need to be able to afford the maintenance or else you end up cutting somewhere (and that could be on the mortgage payment). Without any credit record, they don't know where you'll cut.
Believe me, I think it sucks for responsible individuals. But I believe this is the thought process behind it. They don't really know how responsible you are based simply on a $1500 rent payment.
Posted on 4/11/24 at 10:49 am to DRock88
quote:
When you're renting and the water heater bursts or the a/c goes out, the landlord foots the bill.
When you're the owner, you pay for these things on top of your mortgage payment. Yes, you could get a home warranty to help, but it's still primarily your responsibility.
So, the $1500 in rent is maintenance free. No add ons. If your mortgage is $1500, you need to be able to afford the maintenance or else you end up cutting somewhere (and that could be on the mortgage payment). Without any credit record, they don't know where you'll cut.
Believe me, I think it sucks for responsible individuals. But I believe this is the thought process behind it. They don't really know how responsible you are based simply on a $1500 rent payment.
Plus insurance.. And if you live in LA south of I-10 that could be a few hundred a month!
Posted on 4/11/24 at 10:54 am to Double Oh
quote:
is this common to not give the loan when one spouse has no credit?
my wife is not on the mortgage.
she is on the deed.
do what Dave Ramsey does:
20% down
15-year fixed
find a bank that does "manual underwriting"
my wife and i did not follow this method.
Dave's YouTubes
That is a year old video and he references Churchill Mortgage.
Posted on 4/11/24 at 11:12 am to HeartAttackTiger
Yes his name is on the lease and they had to provide 3 letters showing they had credit references. He could only provide 2 where his spouse provided more than 3.
I’m going to talk to my guy at my bank and see what he says.
By the way the bank that said to come back in a year was Regions Bank
I’m going to talk to my guy at my bank and see what he says.
By the way the bank that said to come back in a year was Regions Bank
This post was edited on 4/11/24 at 11:13 am
Posted on 4/11/24 at 11:15 am to Motownsix
They don’t want to do a FHA loan they want to get a conventional loan. It’s just a starter home until the family gets bigger. I’m thinking they live there 5-10 years then decide on a house to buy the rest of there life.
Posted on 4/11/24 at 11:30 am to DRock88
quote:
They don't really know how responsible you are based simply on a $1500 rent payment.
All of credit management is if you pay your bill on time.
You are overthinking it.
It you use a lot of electricity this month? Do you pay the bill on time?
Water? Do you pay the bill in time?
Phone plans used to be more "variable" than they are today. Long distance, roaming, text fees, data fees. They used to be a great metric for managing monthly credit.
Posted on 4/11/24 at 11:35 am to Double Oh
quote:
It’s just a starter home until the family gets bigger. I’m thinking they live there 5-10 years then decide on a house to buy the rest of there life.
5 to 10 years is long enough to "get the right mortgage" the first time.
That said... the shorter the duration of the loan, the less important the type of loan is.
If they are only there 5 years, tying up capital is less important versus short term opportunity costs (payoff credit cards, car loans, add to IRAs/HSAs).
I'm the type of person who puts 20% down. I'm the type of person to pay 0.375% rate buydowns. But my timeline-horizon is much longer than 5 years in the future. Small burdens today compound "bigly" 15 years down the road (i.e. the home is paid off).
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