Mortgage/credit score help needed! (Long..)?

Deal Score0

Okay, we found our dream house, we made an offer of 130k and our offer was accepted. We had been preapproved through one bank for 125k which was wonderful since we had already planned on putting 8% down. The house is bank owned and they insisted that we be preapproved through their people before the offer was accepted, and we were.

The first person that preapproved us said that she couldn’t get us to closing by the date agreed upon in the contract so we went to a mortgage broker. He said everything would be fine and sent our info out to the banks (or whatever brokers do) and after waiting over a month, he told us that our loan was denied. (My fiance works as an independent contractor and the broker had a hard time qualifying his income) Anyway, so we left the broker and went to a guy at 5/3 bank who said he would have no problem qualifying us and we could still have everything done on time.

Well, when he pulled our credit score we were amazed to hear that our credit scores had dropped significantly due to multiple inquiries from all of the people pulling our credit scores so we can get approved for this mortgage. My fiance’s score dropped from a 740 to a 689 and mine dropped from a 640 to a 616, making me ineligible for the loan. Now without being able to qualify my income, we are only approved for a loan of 100k and now we are unable to get the house after all this.

There has been no negative activity on our credit, only inquiries dropping our score.

My question is: Is there anything we can do about this? Can we dispute the drop in score? How do we go about doing it? Any advice would be much appreciated. We are so frustrated and upset about losing our dream house.
It has only been 1 month and 3 days since we made the offer on the house, so I suppose “over a month” was a little inaccurate. Is 1 month still too spread out of a time frame where it makes it look bad?
Also, as a first time homebuyer, is this something that somebody (anybody) realtor, broker, banks, should have informed us of? We had no idea that by prolonging the process it would negatively effect our credit.

  1. Reply
    May 1, 2011 at 2:27 am

    It’s my understanding that the credit scoring system was set up to not punish people searching for a new mortgages…where several lenders are pulling your credit score all at once. Maybe the mistake was that you did this over a longer period of time….like 2 months or so. The reason that a person is punished with lower scores for too many credit applications is that it makes a person look financially desperate…even if they are not.

    Unfortunately, there is not much you can do other than wait…or maybe you can find another lender who understands the reason for your credit score drop and that it’s not your fault….If this won’t work either….then the next time you start shopping for new mortgages, make sure you make all your applications within 1 or 2 weeks. Don’t drag the application process out or they might punish you again.

  2. Reply
    stan c
    May 1, 2011 at 3:00 am

    Contact a mortgage broker that deals with self employed individuals. It might cost you a few dollars but at least you’re heading in the right direct.

  3. Reply
    May 1, 2011 at 3:18 am

    All credit checks within 14 days for the same type of loan (home vs. car vs. business, etc) is considered one check. By what you are saying, it sounds like you barely missed these cutoffs.

    Also, as a new home purchase, you are responsible for learning about real estate. The main thing is that a property is an investment before it is a home.

  4. Reply
    May 1, 2011 at 3:41 am

    Sorry to hear that, I can appreciate how frustrated you are about losing your dream house. A couple things, I hope I don’t sound harsh.
    1) it seems like before you went to the third person ( the person in the bank), there should only have two credit checks, one is from the person for the pre-approval and one is from the mortgage broker ( the way they works is they do one credit check and bring the same credit check to different banks to try to get your mortgage approval so the banks don’t have to do another credit check). Two credit check should not make someone’s credit score go from 740 to 689 , two credit check’s effect is very minimum. So something is not right here.
    2) Your credit score of 640 was already not a good credit score, not the worst, but definitely not favorable, there are many bank mortgage programs applies to credit score 680 and over. So maybe there’s no negative activities on your credit, but other things such as high balance on your credit card or some late payment or even just short credit history can result in low credit score as well.
    3) From what I see, it seems like you didn’t choose a good broker, a mortgage deal like these should not be a difficult deal for a mortgage broker to get approved. Since your down payment is 8%, I believe your mortgage is a insured mortgage, the mortgage insurance company has a program specifically designed for self-employed person like your fiance which they waive the income verification and based on your self-declared income. So it seems all like you are not lucky with getting a good mortgage person who understands all these rules in and out to help you with the mortgage. If I was you I will ask around friends who know someone who is good to help you with the mortgage, trust me that makes all the difference. And someone who is hungry for the business.
    4) worst come to worst, you can go to a B lender, be really careful with them, but if you love this house so much, it can be worth a try, B lender is mortgage lender who lends money to people who has less favorable credit or income. They generally charge a bit higher interest rate or some might even charge you a fee. I would only go to them if I have no where to go, but I hope you can get it without them.
    5) Unfortunately nobody can dispute the credit score, it is what it is. You can try, but generally it won’t work. And it’s a bit scary now if you fiance’s score drop below 680, then it would be even more harder. I will go back to your last mortgage person in the bank and ask if he can find a senior banker who is more experienced to help you with the mortgage, because it’s same bank they don’t have to do another credit check and it seems to me this mortgage should still be able to get done in the bank.
    Hope it helps.
    Also note to someone above mentioned multiple credit check over a short term won’t affect your credit score, no offense, it’s not true, multiple credit check over a short period of time affects your credit score the most, credit checks through out a long period of time, such as 2, 3 credit check spread through out a year should have no affect on your credit score, but 2, 3 credit check over a month or a couple of days will affect your credit score more.

  5. Reply
    May 1, 2011 at 4:10 am

    You cannot dispute a change in your credit score. The credit scoring formula is what it is. You can dispute only only the information in your credit report, and only if it is factually inaccurate or over 7 years old. If the inquiries did happen, then there is nothing to dispute.

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