Will I get approved for mortgage or should I wait?

[lindtree]

I'm planning to buy a house this year so I've been working on improving my credit over the last year. 7 years ago, I lost my job and ended up really screwing up my credit. I have no late payments or anything negative on my reports in the last 6.5 years. I had 9 derogatory items on my report 1 year ago, including two collections. I paid for deletion on the collections.

Some items have naturally fallen off in the last year. Recently I was able to EE delete all remaining derogatory items from Transunion. Experian should theoretically be clean in 1 month as well. But Equifax's fall off dates for the derogitoriesare several months away (final one is November 2024). 

I was hoping to get pre-approval on a mortgage next month but now I'm worried the derogatory items on Equifax will prevent me from being approved.

Current Mortgage scores:

Transunion FICO 4: 808

Experian FICO 2: 621

Equifax FICO 5: 652

Again, Experian should jump to the high 700's if not 800 like Transunion did, next month before I apply for pre-approval.

Equifax will still have 4 charge offs with balances at that time which all fall off in the next ~6 months. 3 are $1000 or under. The one that will fall off last is 20k...

I have three credit cards currently, all are paid in full every month but one typically reports a balance of $5-$200. No other lines of credit. I also have closed cards is good standing that go back 10 years on my report.
Utilization is 1% for Transunion, which will be the same on Experian next month. 
Salary is $150k base and I've been at the same company for over 5 years. I have about $75k in savings & brokerage accounts. Everything on Transunion in MyFico is listed as "Very Good" or exceptional (so Experian will be the same). 

I'm planning to get a mortgage through Navy Federal Credit Union because they're my main bank (including 1 CC) and I don't want to put 20% down. They have conventional loans that don't require 20% down and don't require PMI. 

If there's a good chance of approval next month, even at a higher rate, I'd rather buy a place now and refi later (for personal reasons). 

Based on the above, what do you think my chances of approval are after Experian is completely clear next month? Any help or insight would be greatly appreciated. 

[ShanetheMortgageMan]

Not sure what NFCU's credit requirements are but with clean credit for 6+ years your credit history should likely be fine.  You shouldn't have to put down 20% no matter where you apply though and make sure you are comparing the interest rate if you did pay monthly PMI vs. if you don't pay monthly PMI, as the rate should be lower if you pay the monthly PMI and PMI isn't very expensive these days especially for higher credit scores.

[lindtree]

Thanks you for your insight! That makes me feel a lot better about my chances of approval.

Good to know about the PMI. I may check out some other lenders that require PMI in that case and compare to NFCU's rates that don't include PMI. 

[MauiMan85297]

Keep in mind all lenders have LPMI (lender paid mortgage insurance), essentially you pay a higher rate to not have PMI included in your monthly payment.  I'm not sure if this is the case with NFCU as they're a CU and COULD have their own guidelines as they're the one lending/servicing the loan.  I do know 2 things about NFCU is that their rates tend to be a bit higher and their turn times are a lot longer (hearing 70-90 days to close a close).  It's always best to shop around as it doesn't affect credit once you have your mortgage scores pulled, when shopping keep this in mind.......

All lenders must provide you with a LE (loan estimate) within 3 days of application, page 1 of the LE will have the simple stuff (Loan amount, interest rate, PITI, cash to close and total costs) and page 2 will break the costs down.  When comparing lender 2 lender you add lines A thru E to get your costs but don't worry about anything below E (pre-paids,escrow) as this can be fanagled by each lender.

Rates aren't going anywhere right now until the fall (and that's a maybe), date the rate and marry the house- when rates fall you refinance to lower the payment.