Can I get $150K home on $45K salary?

[Anonymous]

I'm hoping to buy a home next summer (I have 10 months to go on my current lease). Based on current asking prices for homes in my area (Denton, TX) my ideal home value is in the $150,000. I could certainly find nice homes for less but that seems to be the going rate for everything I'm looking for. My wife works and will help with the mortgage payments so I'm not concerned about whether or not I can easily afford the home. But she has bad credit so I do not plan to include her in the mortgage so I need to focus on whether I alone with my income can get approved for what I'm looking for. About 16 months ago I made a half-assed attempt to look into buying a home. I filled out some forms online and was pre-approved for $122K. However, at the time I was making less money, less control over my credit card debt and my scores were in the 630/640 range. Hoping that within 8-10 months I can get myself in a situation to achieve my goal. My details are below, do I have a shot?

Scores: EQ 707 TU 717 EX 706 (from myfico).

Baddies: TU shows a paid collection from 2/2009 that will not fall off until 2/2016. TU & EX both show four 30 day lates on a Cap 1 card from 1/2008, 4/2008, 2/2009 & 6/2009. Obviously two of those 30 day lates will drop off before I plan to apply so I'm hoping that will give me a little bit of a bump in my scores.

I'm steadily employed with a $45,000 salary. I also receive a bonus but it's not all that dependable. Been at the same job since 4/2012. I worked in the same industry for 4 years prior to accepting my current position. 

I have 2 years left on a $487/month car lease (I know, that sounds crazy and it is, but there's a reason for it that I won't bore anyone with).

I have two cards that are carrying the remainder of my credit card debt from my old ways, about $3600. I plan to have these paid off around March. Reported minimum payments are $25/each. The rest of the cards in my signature are either paid in full each month or are in the sock drawer and not used. 

I anticipate having around $5500 to put down, more if for some reason it's better to save my money for a down payment rather than pay off the credit card debts. Because my credit card debts are not unreasonable and are managable, does it make sense for me to try to vigorously pay them down? I'm currently paying around $300-$400/mo towards them to get them to $0. Would I be better off paying $50/each towards them ($100/mo) and putting the rest towards my down payment? This could put my down payment somewhere in the $8K range with CC debts totalling $2500. Or day I  apply with zero debt and a smaller down payment? Psychologically, I'd like to pay them down to $0 but I'm curious if it's really going to make a big difference to the banks. And since someone's going to ask, both cards are 0% through next fall.

I also have about $5 in a 401k.

Any and all help and advise is appreciated!

[fot1]

I got an 148K loan on something like 33K annual.. So it is possible if eveything else is inline..  The Baddies will hurt underwriting and that Lease is going to hurt what you can afford untill it is paid off.. But you look to be on track..

[ShanetheMortgageMan]

Denton (and pretty much all of Texas) have high tax rates, so the buying power is a bit less because of that.

Using rough numbers, to be able to qualify for a $150k sales price with your stats you'd have to put 15-20% down if going with conventional financing, or 3.5% down with FHA should be possible.

With FHA financing though you will need to include your wife's monthly debt payments in to what you could qualify for, as Texas is a community property state.  If she has no separate debt payments of her own, then you should be good... even if she has up to about $200/mo in debt payments you should be OK (although the debt ratio would then be at the max FHA could approve).

If there is any way your wife could get the car payment in her name alone then conventional with 5% down should be possible.

[Anonymous]

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@ShanetheMortgageMan wrote:

Denton (and pretty much all of Texas) have high tax rates, so the buying power is a bit less because of that.

Using rough numbers, to be able to qualify for a $150k sales price with your stats you'd have to put 15-20% down if going with conventional financing, or 3.5% down with FHA should be possible.

With FHA financing though you will need to include your wife's monthly debt payments in to what you could qualify for, as Texas is a community property state.  If she has no separate debt payments of her own, then you should be good... even if she has up to about $200/mo in debt payments you should be OK (although the debt ratio would then be at the max FHA could approve).

If there is any way your wife could get the car payment in her name alone then conventional with 5% down should be possible.

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So you're saying if I do an FHA loan my wife automatically has to be on it? But if I do conventional she doesn't?

Here's the problem, she got way over her head after college and didn't manage her debts properly. For so long she felt like it was impossible to handle so she essentially ignored the problems. Even now she hates dealing with it. She has a student loan that is currently garnishing her wages. She also had two other loans, both through Wells Fargo, that were perpetually 60 days late for about 2 years. She made consistent payments but was never caught up. I can't remember what exactly she had to do, but because she was so consistent making her payments, even though she was behind, they put her loan back up to current status. I also ran her credit report earlier this year and she had a 2-3 collections for things like random utility bills and a phone bill. Anyways, I don't think there's any way I can get her approved on the loan. Or is it still possible to get her on there even with bad scores if my scores are good enough? Her monthly loan payments amount to $216 for Wells Fargo and $125 for the garnished loan and she makes probably $30K/year. 

I was really hoping to get an FHA loan just using my credit/income. Is that not going to be possible?

[coterotie]

Have you tried using some of the techniques from the rebuilding forum on her credit?  PFD on the collections, Goodwill the Wells and see what you can do about that student loan.  If it is federal, there may be some rehabbing that could be done.  If you could clean it up, get her a secured card, make her authorized on yours, you might see a mid 600 score from her in six months. 

Shane can chime in here, but conventional might then be possible.

[Anonymous]

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@coterotie wrote:

Have you tried using some of the techniques from the rebuilding forum on her credit?  PFD on the collections, Goodwill the Wells and see what you can do about that student loan.  If it is federal, there may be some rehabbing that could be done.  If you could clean it up, get her a secured card, make her authorized on yours, you might see a mid 600 score from her in six months. 

Shane can chime in here, but conventional might then be possible.

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I've browsed the rebuilding forum, but I haven't dove in and tackled those issues yet. I made her an AU on my Amex card, maybe I'll add her on one of my Visa cards too. We'll start tackling some of these issues and see about getting her a secured card of her own. 

[ShanetheMortgageMan]

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@Anonymous wrote:

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@ShanetheMortgageMan wrote:

Denton (and pretty much all of Texas) have high tax rates, so the buying power is a bit less because of that.

Using rough numbers, to be able to qualify for a $150k sales price with your stats you'd have to put 15-20% down if going with conventional financing, or 3.5% down with FHA should be possible.

With FHA financing though you will need to include your wife's monthly debt payments in to what you could qualify for, as Texas is a community property state.  If she has no separate debt payments of her own, then you should be good... even if she has up to about $200/mo in debt payments you should be OK (although the debt ratio would then be at the max FHA could approve).

If there is any way your wife could get the car payment in her name alone then conventional with 5% down should be possible.

---

So you're saying if I do an FHA loan my wife automatically has to be on it? But if I do conventional she doesn't?

Here's the problem, she got way over her head after college and didn't manage her debts properly. For so long she felt like it was impossible to handle so she essentially ignored the problems. Even now she hates dealing with it. She has a student loan that is currently garnishing her wages. She also had two other loans, both through Wells Fargo, that were perpetually 60 days late for about 2 years. She made consistent payments but was never caught up. I can't remember what exactly she had to do, but because she was so consistent making her payments, even though she was behind, they put her loan back up to current status. I also ran her credit report earlier this year and she had a 2-3 collections for things like random utility bills and a phone bill. Anyways, I don't think there's any way I can get her approved on the loan. Or is it still possible to get her on there even with bad scores if my scores are good enough? Her monthly loan payments amount to $216 for Wells Fargo and $125 for the garnished loan and she makes probably $30K/year. 

I was really hoping to get an FHA loan just using my credit/income. Is that not going to be possible?

---

I am saying with FHA, you need to include the non-borrowing spouse's debts into the borrowing spouse's debt to income ratio.  She doesn't have to be on the loan, but her credit will be checked in order to calculate what her monthly payments are... and then your income alone will need to qualify for both of your payments.

Conventional doesn't have that requirement.

[Anonymous]

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@ShanetheMortgageMan wrote:

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@Anonymous wrote:

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@ShanetheMortgageMan wrote:

Denton (and pretty much all of Texas) have high tax rates, so the buying power is a bit less because of that.

Using rough numbers, to be able to qualify for a $150k sales price with your stats you'd have to put 15-20% down if going with conventional financing, or 3.5% down with FHA should be possible.

With FHA financing though you will need to include your wife's monthly debt payments in to what you could qualify for, as Texas is a community property state.  If she has no separate debt payments of her own, then you should be good... even if she has up to about $200/mo in debt payments you should be OK (although the debt ratio would then be at the max FHA could approve).

If there is any way your wife could get the car payment in her name alone then conventional with 5% down should be possible.

---

So you're saying if I do an FHA loan my wife automatically has to be on it? But if I do conventional she doesn't?

Here's the problem, she got way over her head after college and didn't manage her debts properly. For so long she felt like it was impossible to handle so she essentially ignored the problems. Even now she hates dealing with it. She has a student loan that is currently garnishing her wages. She also had two other loans, both through Wells Fargo, that were perpetually 60 days late for about 2 years. She made consistent payments but was never caught up. I can't remember what exactly she had to do, but because she was so consistent making her payments, even though she was behind, they put her loan back up to current status. I also ran her credit report earlier this year and she had a 2-3 collections for things like random utility bills and a phone bill. Anyways, I don't think there's any way I can get her approved on the loan. Or is it still possible to get her on there even with bad scores if my scores are good enough? Her monthly loan payments amount to $216 for Wells Fargo and $125 for the garnished loan and she makes probably $30K/year. 

I was really hoping to get an FHA loan just using my credit/income. Is that not going to be possible?

---

I am saying with FHA, you need to include the non-borrowing spouse's debts into the borrowing spouse's debt to income ratio.  She doesn't have to be on the loan, but her credit will be checked in order to calculate what her monthly payments are... and then your income alone will need to qualify for both of your payments.

Conventional doesn't have that requirement.

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So they'll add her debt to my debt, but won't look at her income? That's a kick in the gut. Was hoping to do FHA, not sure how I can scrounge together $30K for a down payment in a year in order to qualify for conventional.

[ShanetheMortgageMan]

Correct, only can use the income of people who are applicants on the loan.

The car payment is really what is preventing you from going conventional.  I'd look into your options on how to reduce or get rid of that.

[Anonymous]

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@ShanetheMortgageMan wrote:

Correct, only can use the income of people who are applicants on the loan.

The car payment is really what is preventing you from going conventional.  I'd look into your options on how to reduce or get rid of that.

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Not going to happen at this point. I had to trade another vehicle that I was upside down on because it had been wrecked with structural damage (but not totalled) and I didn't want my wife driving our new baby around in it. So I rolled all the negative equity into a 3 year lease on a base model SUV so that my wife could have a safe vehicle for my new baby and when the lease was over I'd walk away from the bad debt free and clear. The other option would have been to purchase the new car, payments would have been $485 for SIX years. Total buyout would be $27K and it's worth $19.5K. Typical advertised lease rates for the vehicle I'm driving is $209, so it's not anything extravagent, I just need to burn through that negative equity from the old car.

I guess the more I think about it the more I need to just accept the fact that I should wait 2 years. In two years ALL my negatives drop off (the collection and newest 30 day lates are from 2009), ALL my inquiries drop off and of course my AAOA will improve. And at that point I can turn the lease in and take on a much more reasonable car loan. It also gives me 2 years to work on my wife's credit and to save more money for a down payment.

It just sucks because it sounds like if I was single this wouldn't be an issue. What if I drop my expectations to $125K to $130K range, could I get in to an FHA in a year with my DTI?

I truly appreciate all of your help.