800+ Credit Score but Only Qualify for Low Loan Amount.

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800+ Credit Score but Only Qualify for Low Loan Amount.

Jim Webster
Rental Property Investor · CO · Member since 2018 · 11 posts · 8 votes

My wife and I both have 800+ credit scores (thanks Dave Ramsey).  No debt besides a mortgage for less than 50% of our $300+K primary residence.  (Thank again Dave)  $90K combined income.  

Recently caught the REI bug and lenders I've talked to will approve $40K-50K max due to the age of our accounts and lack of activity opening new lines of credit. I know maintaining 800+ is unrealistic and probably unnecessary in the investing arena. Primarily, we are looking for BRRRR and buy & hold properties and know rehab expenses are imminent.

Question - What's the best way to increase our lending limits without completely tanking our scores?     Also, we currently have @$30k in liquid funds, do we need access to more than $50K for these types of ventures?

Thanks for your input BP!  

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
You should talk to another lender there’s something else going on here. I have less credit score and I have way more mortgage debt. I’m not that old so my accounts aren’t that old either
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  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    You should talk to another lender there’s something else going on here. I have less credit score and I have way more mortgage debt. I’m not that old so my accounts aren’t that old either
    4Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    8y

    Hi I would recommend working with a loan officer. I've told the story on here a few times about not getting a loan from a specific bank, began working with a loan officer and she ends up getting me a loan (at a good rate) with the very same bank that was previously unwilling to give me a loan. 

    She provided the bank with more information/paperwork and I'm sure her relationship of working with the bank in the past helped. 

    3Reply
  • Jonathan PfluegerPro Member
    Ben Lomond, CA · Member since 2016 · 338 posts · 337 votes
    8y

    @Jim Webster

    I agree with @Caleb Heimsoth, there seems to be something else at play. If what you say is true about your DTI, you should be approved for a larger loan. Is the mortgage payment on your primary residence exorbitant?

    I would get a second opinion. Talk to as many lenders, mortgage brokers, small banks, and family members as you need to. There are always options out there if you look hard enough. 

    What do you think @Joe Stretch? 

    2Reply
  • Jim Webster
    OP
    Rental Property Investor · CO · Member since 2018 · 11 posts · 8 votes
    8y

    @Jonathan Pflueger PITI is $1030/mo.

    0Reply
  • Jonathan PfluegerPro Member
    Ben Lomond, CA · Member since 2016 · 338 posts · 337 votes
    8y

    @Jim Webster

    That is normal, I would definitely shop around! The answer is always no if you don't ask. 

    2Reply
  • Jim Webster
    OP
    Rental Property Investor · CO · Member since 2018 · 11 posts · 8 votes
    8y

    @Caleb Heimsoth

    Thanks for your input guys.

    I've been reading other threads where the challenge is accessing funds with poor credit.  The consensus is to fix the credit.  Our credit is about as 'fixed' as it can get.  

    We have 2 credit cards besides our bank debit card.  Those 2 accounts are more than 5 years old and have been paid off and largely inactive for the past 4.  The rejection letters we've received essentially say we're not active enough.  We want to go about getting active without shooting ourselves in the foot.   

    @Karl B. Mortgage lender or bank?  Or does it matter?   

    1Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    8y

    @Jim Webster It was a mortgage lender. 

    1Reply
  • Kelly Iannone
    Rental Property Investor · Orlando, FL · Member since 2018 · 301 posts · 354 votes
    8y
    I’d recommend using the credit cards at least minimally, say for gas and or groceries, and pay them off every month (or every week) to show activity. I have a credit score of 780+ and use my credit card for EVERYTHING. Child care, grocery, gas, anything else I need to buy in the month and then pay it off 100% each billing cycle. This illustrates my ability to pay debts on time and reliability.
    4Reply
  • Amy Beth
    Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes
    8y
    If you do not use your credit cards they will be closed down due to inactivity and hurt your score. I would at least use them to buy gas or another small purchase and pay it off when the bill is due to keep the account open. I would use a mortgage broker to find a lender whom will loan to you. Based on the data you provided you should be able to find a mortgage loan for a higher amount.
    2Reply
  • Jim Webster
    OP
    Rental Property Investor · CO · Member since 2018 · 11 posts · 8 votes
    8y

    @Kelly Iannone  & @Amy Beth - Following Dave Ramsey's principles got us into the habit of carrying cash. I see now how that has hurt us even though we have a great score. Shopping now for a credit card with cash back or other usable reward tied to it. Then to mortgage brokers to shop for a HELOC.

    The input is much appreciated everyone, thank you.  

    0Reply
  • Joe Stretch
    Salinas, CA · Member since 2018 · 17 posts · 16 votes
    8y

    @Jim Webster @Jonathan Pflueger yes, definitely something else going on...I'm a licensed MLO here in CA (nmls 1503643) I've mentioned before that lenders have "over-lays" which are extra guidelines, and it sounds like you are only getting one opinion, maybe not the correct one. 

    "Age of accounts" is a subjective opinion. Your credit score is awesome, and yes, you can maintain that for a lifetime by just being aware of your situation. As far as cash in the bank, if you are looking at investment property, a lender may likely ask to see 6 months of PITI that you have access to, but never a flat dollar amount like "$50,000".

    Most lending requirements are based on ratios. Loan to value (LTV), Debt to Income (DTI), etc, etc. Sounds to me like you are either speaking with a local conservative bank, or a misinformed individual.

    If you want to "play the credit game", one simple option is to open a credit card or 2, but don't use it.  Just open it and let it sit on your credit bureau.  By doing that it increases available credit, which, ironically enough, is also another ratio in play when looking at mortgages.  Remember, banks like to lend money to those to appear to not need it, but

    from what you are describing there should be no issue with getting a loan.

    I have a friend in Colorado that is a mortgage broker.  If you want to get a 2nd opinion from him either message me, or Google my first and last name and give my office a call.     You will get it done...

    3Reply
  • Anthony Rodriguez
    Specialist · St Petersburg, FL · Member since 2017 · 62 posts · 34 votes
    8y
    Everyone said it best. 1.) try different lenders 2.) start using your credit cards sparingly. 3.) Have you thought about taking a HLOC on your current house?
    1Reply
  • Seth WilcockBusiness Member
    Lender · Nashville, IN · Member since 2016 · 138 posts · 84 votes
    8y

    Hi Jim - It sounds like the first lender doesn't really know what they're talking about. 

    Lenders are going to look at three main criteria from a credit approval standpoint. Credit + Income + Assets. 

    CREDIT:

    800 FICO is as good as it's going to get. Once you're in the 740+FICo range you're in the top tier for interest rates on a mortgage. 760+ for MI rates. Either way, you're in the top tier. If the lender is concerned about "thin" credit or "short" credit, other non-traditional trade lines may be used to qualify you. Non-traditional trade lines would be things like your cell phone bill, Netflix bill, utility bills, etc. 

    INCOME:

    My assumption, is this is likely where the lender you spoke with is getting stuck. You can use estimated net rental income to offset the payment on the new purchase if you're buying the home as an investment property. The gross rent will be determined by the appraiser on the appraisal report, and the net rent that would be added into your qualifying income would be 75% of that number. With your combined income of $90K and no other debt (except your current mortgage), $40K-$50K approval is not correct. No way. 

    ASSETS:

    With $30K in the bank, this would get you to at least a $200K purchase price with a 15% down payment on an investment property. Another strategy, would be to consider a cash-out refi on your primary, to do a larger down payment on one investment property, or split up the cash-out proceeds for lower down payments on more properties. It doesn't sound like assets (down payment) is an issue. 

    Definitely talk to another lender. 

    Resolute Lending Powered by Independent Mortgage Brokers LLC
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    1Reply
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