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Thread: Different types of mortgages?

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    Veteran Member christian211's Avatar
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    Default Different types of mortgages?

    As it stands now, we have pretty poor credit. I was reading previous threads last night and ran across some info on mortgages. Now this is all hypothetical and in ideal circumstances, but when we do plan on buying a home I would like the option to throw extra payments on it so as to cut a 30 yr. to 10 yrs or less. Now I read here that that's only possible w/ a conventional mortgage which is only possible with good credit. Now all this would be further down the road, I would say beginning of 2009. What kind of credit scores am I looking at to be approved for a conventional mortgage?
    We have no real debts now, but we have a bunch of chargeoffs on our credit. I called some places about having them take it off and I got very short and rude no's. Does anyone know the names of some good credit cleaning agencies in Mass. I could contanct about cleaning this crap up? Also, ballpark on what they charge, how long does it take for the positive affects to show on your credit report,etc..?
    Also, thanks for the good info on my other thread. I bookmarked it as a reference for the future. Thanks!!!

    Christian

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    God/dess VenusGoddess's Avatar
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    Default Re: Different types of mortgages?

    You can do all of the disputing yourself. I cannot remember the name of the website that gives the info on this...its on the board somewhere. I'll see if I can find it.

    Next, to get a conventional mortgage, you are looking at a score of around 660+.

    Conventional mortgages are not the ONLY types of mortgages you can pay down early, though. You have to shop mortgages and rates. Subprime is not just for "bad credit" people...its for people who want a different scenario than conventional offers. For instance, someone who makes a lot of income, but does not have the "cash flow" to prove it (say, an independant contractor). In Subprime, you can still get a good rate if you have a high score, but you can also get more "products" that you can use to fit your needs.

    Conventional is harder to qualify for because of the guidelines banks need to adhere to in order to sell the loan to FannieMae/FreddieMac.

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    Default Re: Different types of mortgages?

    ^^ http://www.creditboards.com have great info. on how to dispute items on credit reports, and they also have a mortgage section....lots and lots of info on that site. the people are helpful and friendly too
    "Seeing the landscape at this superficial level only captures its boring uniformity, not allowing you to immerse yourself in the spirit of the place; for that you must stop at least several days."

    ~Che Guevara, "The Motorcycle Diaries"

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    Featured Member Vamp's Avatar
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    Default Re: Different types of mortgages?

    The definition of sub-prime lender is a lender who loans money (in any capacity) to those who do not qualify for a loan under prime qualifications. Sub-prime lending has nothing to do with type of loan you receive. You do not have to go to a sub-prime lender to get a mortgages other than a 30yr fixed. Sub-prime loans usually have more fees, prepayment penalties, and higher interest rates.

    Anytime you want to get a loan do some research. Yes I know it is boring and yes I know it is time consuming. But wouldn't you rather know what you're doing when you go into to sign the papers instead of blindly following anyone's advice? The internet is a great way to start. There are tons of books out there too. Suze Orman is a great financial author. She keeps it simple and to the point.

    Do not waste your money on paying someone to just clean up your credit report. Charge offs stay on your credit report for seven to ten years. Charge offs mean that you never paid the amount owed. The only way to get them taken off early is to pay them or document/ dispute they are in error. If anything is updated on your credit report it can take up to 90 days for it to appear on your report.

    www.fanniemae.com has a great step by step process online for first time home buyers. It has alot of education, links, and a great search feature for credit counselors nation wide. Credit counselors are great for getting you on the right track, budgeting, and help clean up your credit report the legal way. There are many differant types of mortgages research them all and find what will work best for you. In my opinion with rates going up a fixed rate is best.

    While you are cleaning up your credit and researching; save for a down payment. Any amount you put towards a down payment will save you thousands in the long run.

    Research Research Research!

    Disclaimer: I currently work for a bank and have worked in the finance world for over six years.
    Last edited by Vamp; 10-08-2006 at 08:47 AM.

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    Default Re: Different types of mortgages?

    not to beat a dead horse any farther, but by 2009 the new federal mortgage lending regulations (which are now being finalized) are virtually assured to be in place. This will almost certainly mean that in order to be approved for a 'conventional' mortgage through a 'mainstream' lender at a 'good' interest rate ...

    #1 - you'll need a good credit rating (the 660 number is probably pretty accurate)
    #2 - you'll need three years worth of past tax returns showing a sufficient amount of total reported income to prove to the 'mainstream' lender and their secondary mortgage underwriter that you can indeed afford the monthly mortgage payments you are seeking plus any other regular monthly payments you have committed to (i.e. car loan), plus the general cost of living in your zip code area (from the IRS database).
    #3 - you'll need 20% of the purchase price of the house you plan to buy saved up as a down payment, plus an additional 5% or so to cover closing costs.

    If you don't / can't satisfy the above three requirements, this does not mean that you won't be able to get a mortgage. But what it probably means is that you'll be forced to go to a 'subprime' lender instead of a 'mainstream' lender - it probably means that you'll wind up paying a 2%+ higher interest rate to cover the greater risk of default / bankruptcy associated with 'subprime' mortgage loans and borrowers in general - and it probably means that there will be strict rules and penalties written into the terms of your 'subprime' mortgage (i.e. re-fi's, early paydowns etc.)

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