Any assistance for low income people with lots of equity but high payments in relation to SSDI income? Never missed a payment since 1994.

I was the financial support for my family and started a small business for my ex since he told me one day he would like his own tint shop. When I started having health problems I kept my full time job with local gov (and all the cooking, cleaning, repairs, finances and child care) but let my ex run the business. He didn't pay anything on time which hurt my credit since it was all under my name. I did pay everything off when I got my back pay from SSDI but my credit shows otherwise. However I am confused with scores. My credit isn't good if you look at the credit agency # but my Vantage # is between 720-760 on Credit.com, Creditkarma and Quizzle. I need to refi to pay off my ex. So the purpose of the refi is two fold. To remove his name from the title and to get cash out so I can buy him out.

I owe just under $34K (we moved in in Sept 1994 and I have never been late on my mortgage) and I would like around $50K cash out. I would also like to get rates and closing est for 30 yr, 5/1, 7/1.

If you think I would qualify how long would it take?

Asked by Vickey

2 Answers

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Answered by Mark Haynie, Mortgage Broker in Los Angeles, CA
Hi Vickey, sounds like you've had a rough run and it's a familiar tale. If the accounts you mention had extensive late - or just plain ignored payment histories, it takes some time once they've been cured to reflect on your credit scores. The scoring models used for consumer credit, like those you listed, are different than scoring models used in mortgage. Mortgage is generally about 5% "tougher." So a 760 in a Credit.com will equate to about a 720 or even less in mortgage scoring - depending on the "derogatory" items. The fact that you have no mortgage lates is a benefit because there are lenders that disregard consumer lates that are >24 months old. Some draw the line at 48 months, so you'll want to talk to a sharp veteran that knows/has access to guidelines. Fannie and Freddie loans are pretty amenable to credit maladies.

The next issue is going to be income and you can than Dodd-Frank for choking the American public's ability to qualify these days. 43% DTI (debt/income ratio) is a hard line in the concrete. You add your monthly consumer obligations (cards, cars) along with your proposed principal, interest, monthly taxes and insurance and that's the debt side. Divide that total by 43% ($1000 / 43% = $2326) and that's the income you need to qualify. SS and DI can be "grossed up" to 125%, and you can use full benefit of IRA distributions in addition to any W2 or other income you have. Fannie and Freddie don't do cash out and the lenders that do will likely require a 740 or even 760 score.

I hope I answered your questions, but it may not have been the answer you hoped for. I wish you the best! | 09.10.14 @ 01:22
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:55
Answered by Chad Freeman, Branch ManagerPRO+ in Bethesda, MD
Vickey:

I believe that Mark provided a thorough answer to your question, but I would add one more item since you are looking to take cash out. Take note of what your property may be worth; you won't know the final value until an actual appraisal is completed, however take some time to observe what homes are selling for in your neighborhood. You'll be limited on the loan amount for a cash-out refinance relative to the value of the home even if you qualify personally. Typically, you cannot finance more than 85% of the value of the home in a cash-out transaction. Good luck. | 09.10.14 @ 02:09
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:55
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