Borrowing someone's credit score

[mommyoftwo]

What is the name of your state (only U.S. law)? PA

OK... this is a weird situation. I am currently applying for an FHA loan for a house. My problem is that I have no credit.... not good, not bad, just none. I was going to have my father-in-law co-borrow for me, but I'm told that will make him a "non-occupying owner" and we would need 15% down (as opposed to the normal FHA 3%). I was told from a mortgage broker that if he added me to three of his credit cards as a secondary cardholder that those three pieces of credit would also be listed on my credit report allowing me to get the loan in my name alone. He has agreed and added me to the three credit cards as of today, however, I just think that sounds "odd". Has anyone ever heard of this practice and/or does it work?

The home I have found is in another school district and I have to switch my daughter's school and I'm under a bit of a time constraint. I was told by my broker that once I'm added to his credit cards, they should report to my credit by the end of the month. Does this sound right?

**I originally posted this in Buying and Selling a Home but moved it here... not sure exactly where it should go.... please move it if i put it in the wrong place. thanks!***

[dmiller12]

but I'm told that will make him a "non-occupying owner" and we would need 15% down (as opposed to the normal FHA 3%)

Incorrect. You can finance 97.75% (maximum financing) of the property value with a non-occupying co-signor unless you are purchasing a duplex, in which case you need 25% down.

I was told from a mortgage broker that if he added me to three of his credit cards as a secondary cardholder that those three pieces of credit would also be listed on my credit report allowing me to get the loan in my name alone.

There used to be some validity to this. Not so sure anymore. I believe credit bureaus have caught onto this trick so you may not experience the result you want. But, it doesn't hurt to try. It's not illegal or anything to do this.

I was told by my broker that once I'm added to his credit cards, they should report to my credit by the end of the month. Does this sound right?

For the most part, YES that should be true but it depends on when the creditor normally reports in relationship to when you are added. If you are added today and the creditor doesn't report for, let's say, another 59 days, then it could take longer. Not every lender reports every 30 days.

An alternative plan would be to provide "non-traditional" credit , i.e. cell phone, rent history, car insurance, utilitiy bills etc... and get letters of credit covering the most recent 2 years or at minimum 12 months. In the end, you may still need dad as a co-signor depending on your debt-to-icnome ratio. With non-traditional credit, FHA will require you to adhere to a strict 31/43 ratio. That means your payment cannot exceed 31% of your gross income and your payment plus debt cannot exceed 43% of your gross income. They'll want you to meet both ratios and with no debt they'll be focusing on the payment-to-debt ratio (31%). Your dad's income may help you meet the ratio requirements.

Do HUD approved homebuyer counseling as well. This will help to minimize the recently added risk based Mortgage Insurance premiums that just went into effect today.

Finally, inquire about first time homebuyer loans in your area. Generally you can get a lower then market interest rate and in some cases interest free loans to help out with closing costs. Many brokers are not able to do FHA loans along with first-time homebuyer loans because they don't have what's called their "Full Eagle" status from HUD. If they can't do it, find a lender that can.

[HUD-1]

I would advise againts the credit card borrowing scam. Credit reporting agencies are on to this. A 97% loan is ok if there is a blood relationship or a family-type long term relationship with the non-occupying co-borrower. (Father-in-law) dmiller's point about non-traditional credit is right on the mark. You should not be turned down on an FHA loan for insufficient credit, only for bad credit.

[mommyoftwo]

Id just like to say thank you for all your advice. Your suggestions were enough to throw up enough red flags to "just check" other places. I ended up driving a mile up the road to the bank and just giving them the scenario that I gave you, they were a bit confused as well. I had them run it and see if they could do anything for me and they have basically said, with my father-in-law's credit and my income alone, there should be absolutely no reason why it shouldnt be approved. (My father-in-law's income is very large and his credit score according to them is 811 so I believe them to be frothing at the mouth at the prospect of this loan). Its currently at their underwriter for final approval. (how long does the process take from that step?)

They managed to help me in a day and a half and do more than this broker has done in weeks (and saved me the broker fees).

I wanst eligible for the first time homebuyer because my father-in-law will co-own and he will be on the mortgage and owns a home of his own. I dont have any non-conventional credit because all of our bills are in my husband's name alone (he has a foreclosure on his credit report... thats why he isnt in this scenario anywhere).

Again, thanks so much for the advice!! It was your comments that drove me to the bank "just to check".

[dmiller12]

Great. Enjoy the new house.