Can I Qualify for an FHA Mortgage - Details Inside

[Oyiwaa]

Hello Folks,

I am thinking of applying for a mortgage - either December 2013 or early 2014. Here are pertinent information regarding my credit, income, asset to help you make a decision.

Credit.  My current (November 2013) credit scores are:  EX=634 / EQ=649 /TU=666 .

• No collections
• 1 State tax lien reported by EX and TU
• 1 public record reported by EX
• 3 charge-offs (Orchard/HSBC card; National City/PNC Bank and Suntrust Bank car loan): Settled in 2010 for HSBC and Suntrust; Fully-paid off PNC Bank card earlier this year after several PDF attempts. Several lates on the above 3 accounts from 2008 until they were settled and closed in 2010.
• 1 paid and closed account (Comenity Bank) but with lates between 2008 and 2010.
• 3 lates on a Bank of America credit card in October - December 2012.  Still trying to GW a delete, but no succes so far.

• Current credit (No Lates): 
• 1 WellsFargo Secured Credit: Limit=$300; Balance=0  (Graduated in May)
• 1 Capital One Credit Secured Credit Card: Limit: $800; Balance=$10
• 1 Capital Bank Secured Credit Card:  Limit=$350; Balance=$0

Income and Sources.

• Regular employment of 7+ years (salary/w2s):  Gross  = $5000/month.
• Self- employment income, ongoing for about 1 year.  Gross =  $800 / month. 
• Occassional consultancy (1099) income:  varies but about $10K each of 2011, 2012, 2013.
• Married, but wife is unable to work. Hence mortgage will be based solely on my income.

Monthly debt payments. 

• Credit Card payments:  $100-$200 (much lower now because of plan to keep utilization low)
• Rent:  $2,000
• Utilities:  $500
• Insurance (Auto + Property): $400

Employment:

• Salaried worker: same job since 2006
• Self-employment / part-time - irregular hours
• Occassional consultancy - varies and unpredictable

Assets/Reserves.

• Savings:  $5000
• 403B:  $70K (but can't touch it for reserves)
• Physical assets (car and other household items) - can be sold if need be.

Location. 

• NJ, Camden County

Property:  Condo (townhome)  // Condition - good.  I am currently renting it, and would love to buy it. I checked and my condo is FHA-approved

Value:  $250K - $260K

Occupancy.  Primary residence

Transaction Type.  Purchase; owner willing to pay (amount to be determined) some of the closing costs.

So here you have it - kindly let me know your thoughts ...
 

cheers, Oyiwaa

[GRate]

FHA minimum down payment is 3.5% of purchase price. Middle credit score has to be at least 640. As far as your liabilities, rent and utilities are not included in the DTI calculations. Only tradelines on your credit report such as: the new mortgage, property taxes, homeowners ins, HOA dues, auto loans, student loans, credit cards, and any other personal loans.

Seems like you should be good from the information provided but only a lender can pre-approve you for a purchase. I recommend talking with a few different lenders and shopping around for the best mortgage for yourself. Contact me through email on my profile if you have more questions.

[foofighter74]

I would make sure the lates you're listing from October - NOvember 2012 are fully aged at least a year before you apply.  There are plenty of people who have posted on this board that they were unable to be approved for a mortage until all their lates were at least a year old. 

Also, you have your rent listed as $2,000 per month right now.  I'm not sure if the self-employment income will be included in the mortgage application or not, but if you take your regular salary of $60,000 / yr, plus another $10,000 a year in consulting work...that's 5833.33 per month.  Your rent is 34% of your gross monthly income. Your back end DTI ratio looks like it would be fine as you don't have many other debts outstanding...but a lot will depend on the purchase price and the projected monthly payments of principal and interest plus taxes and insurance.  Given all the rule changes and individual lender overlays, I'm not sure what the maximum front end DTI ratio is for FHA now...i'm sure someone will cover that in this thread eventually, but it's something you'd have to be mindful of.

My wife and i built a new house this spring, moved in at the beginning of the summer...the purchase price was just over 2 times the amount of our yearly income and an our lender was very strict about having a 31% front end ratio (PITI / Gross monthly income).  I'm not sure what you'll hear from lenders in your area now.

As mentioned, you'd need 3.5% of the purchase price for a down payment, and that has to come from you.  $265K would be just over $9,000, plus closing costs.  But if the seller pays some of the closing costs, it would increase the purchase price.

[Oyiwaa]

Thanks very much for all your advice.

The selling is willing to help with the closing costs and replace some appliances in the house.

1. Does it mean that the more seller concessions (in terms of closing closts assistance), the higher the purchase price? 

2. Which is better to ask for - closing costs assistance or reduction in purchase price?

3. Under what circumstances can you use one or the other?

4.  Finally, about the pre-approval processs:  can I get different pre-approvals from different lenders within the same 3-month period that I am shopping for a mortgage?  Will it count against my score, as most of them will want to do their individual pulls?

cheers, Oyiwaa