Manual Underwriting (insurance, loan officer, credit card, rate)

[whoisjongalt]

Has anyone had experience using manual underwriting for a mortgage vs. the popular FICO score-based type? I am planning to buy a house in the next 4-6 months and am also in the process of closing my credit cards. I don't intend to ever use them again or to borrow money for anything else. Right now I have a high FICO score but I know it will go down once I've closed my cards. Should I wait until after I get the loan to close them or should I just get a loan from someone that does manual underwriting? Does it make any difference?

[20yrsinBranson]

Financial Expert and Talk Radio Show Celebrity Dave Ramsey (Dave Ramsey Homepage - daveramsey.com) swears by manual underwriting. There is a link on his site to a company that does this and that he recommends. The objective, I think is to not to give in to the temptation to attain "debt" so as to increase your FICO score. It makes sense to me. I have been very happy following Dave's recommendations. Good luck

20yrsinBranson

[whoisjongalt]

Thanks! I love Dave Ramsey's show too. He always says the two best FICO scores are around 800 and 0. I just don't want to be in that middle area while I'm trying to get a mortgage just because I've cancelled all of my cards. As soon as the loan is done, they are GONE. I figured I would check out the place he recommends too.

[Green Irish Eyes]

I think your wisest course would be contact either a mortgage broker or loan officer at your local bank and see what s/he has to say.

[chet everett]

The OP must understand that Mr. Ramsey is giving advice from the same sort of position of FORMER DRUNK telling everyone that the only way to be sober is to smash your liquor bottles. His own website admits that he got WAY into debt and the ONLY WAY HE could get out was to get rid of his credit cards. He was a "debt-oholic". If you like his inspiring story that is great BUT YOU MUST KNOW that IF you are attempting to buy a house IT IS A REALLY BAD IDEA to cancel all your credit cards.

FURTHER the number ONE thing that you, as a potential borrower, NEEDS TO KNOW is that DESKTOP UNDERWRITING is a VERY GOOD THING for borrowers and results IN CHEAPER loan rates for the simple reason that it is MUCH LESS LABOR intensive for BORROWERS.

In fact if Mr/ Ramsey is suggesting that your "check out the firms that he recommends" you better believe that those firms are PAYING HIM A LOT OF MONEY and that money is COMING FROM YOU AS A BORROWER. I can guarantee that you can get a BETTER DEAL from a firm that spends less on advertising.

Don't get me wrong -- it is ALWAYS a good idea financially and otherwise to PAY OFF DEBT as quickly as is prudent. It is never bad to get "fired up" by a MOTIVATIONAL SPEAKER like Mr. Ramsey, but it can be a REALLY BAD IDEA to "drink the KoolAide" and mindlessly do things that WILL COST YOU MONEY with NO UPSIDE by following BAD ADVICE.

If Mr. Ramsey really believes that the only good FICO scores are "zero and 800" is a big fat liar. From the standpoint of someone attempting to finance the purchase of the "best" rates are generally available to those with scores of 720 and above, though there are some circumstances where a 740 might be worth a bit more. https://www.efanniemae.com/sf/refmat...llpamatrix.pdf

A person with "no credit cards" will certainly NOT have a FICO of "zero", and in fact if Mr. Ramsey does not mean that as hyperbole I would seriously distrust the rest of his advise / pronouncement... Credit score (United States) - Wikipedia, the free encyclopedia

If you want the BEST RATE it would be extremely unwise to DELIBERATELY tank your FICO score by CLOSING accounts prior to applying for a mortgage. In the same vein, if your desire is to make things EASY for the lender so that they can afford to give you the best overall deal you should definitely prefer to quickly move through automated/ desktop underwriting.

I will go so far as to say that any problems that were broadly caused by overuse of desktop underwriting are frankly NOT something a borrower should care about. Even if you are considering the larger public policy issues the real problem was (is...) lack of honest information. Any lender that was burned by a LIAR faking about behaviors to meet standards for desktop underwriting COULD CERTAINLY fake up documentation for manual underwriting, probably MORE EASILY...

Please, for the sake of your own financial health, do not take too literally the attention grabbing BS of anyone!

[VictorBurek]

Closing your credit card accounts will have a negative impact on your FICO score. If you pay them off, get rid of the cards but dont close the accounts. Also, underwriting is much harder with a manual underwrite and some lenders have overlays which increases the rate.

Your best option would be to do a full qualifying purchase with automated underwriting.

[ilikeallofu]

I just went through the mortgage application process and the above posters are correct. We closed about 6 credit cards a year ago and got dinged on our credit score. I don't know all the technical details, but my personal experience is to pay the cards off but don't close the account. As soon as you got the closing done for ur house, then feel free to close the credit cards.

[whoisjongalt]

Thanks for all of the advice! Since I have a really good FICO score and I want to do this within the next 3-4 months, I will probably just WAIT until after I buy the house to get rid of my cards. That way I have the option of either type of loan application to get the best rate. I won't have any debt except the loan and, at that point, I don't care if it affects my score since I don't plan to borrow money again.

[Elke Mariotti]

FWIW, your car insurance rate is also influenced by your FICO score...