Mortgage Loans

[ladylpk74]

I would appreciate any advice anyone can give me. My husband and I want to buy a home. My yearly income is $45,000 and my scores are EX 776, EQ 782, TU 782. My husband makes about $25,000 a year and all three of his scores hover around 589. Under my credit I have one cc with a $350 min payment monthly. I also have a monthly student loan payment of $150. My husband has no debt, but he has two collections and several late payments. We have about $15,000 in savings. Since they look at the lowest mid score of the two applicants there is no way we will qualify for a loan using his credit. Is there anyway I can apply for a loan under my name only and use his credit? We file our taxes jointly every year so his information is included on the tax return. Of course I would want to add him to the deed, but I want to know if this is even possible. I feel without his income I won't qualify for a large enough amount. We were hoping to get at least $200,000.

Thanks

Patricia

[ShanetheMortgageMan]

Welcome to myFICO.com Patricia.  Having a 589 mid score doesn't preclude him from qualifying for financing, FHA loans do not have a minimum score requirement, just a credit history requirement (if the last 12 months are clean, and 24 months without any BKs/foreclosures then he has a good shot).  You can't combine your income and just use your scores, if you use his income he has to be on the loan.  You can however use a "no ratio" documentation type with just you on the loan and where income isn't listed, and which requires at least 5% down, your scores are well above the minimum needed, and would require 4-6 months of reserves (1 month of reserves is equivalent to 1 month of the total housing expense - principal & interest, taxes &, insurance) after the down payment/closing costs are paid for.  Also, your debt to income (DTI) is high but not too high to qualify... using a $200k financed amount and also assuming that's the sales price, figure about $1,265/mo for your monthly P&I payment, throw in property taxes/homeowners insurance of $425/mo (estimating) your debt ratio is just under 60%... however since you have excellent credit scores, and if you can document 2 months of reserves you'd have a pretty good chance of qualifying on your own.

[ladylpk74]

Shane thanks for the great info. I thought we were doomed because of his poor credit and my high monthly debt. One of the collections that are under my husbands name is dated back to 2003. The other was reported May of this year, but after joining the board I sent out a PFD letter. He also has two 30 day late payments from seven months ago on an account he has since paid in full. I am in the process of sending out a GW letter to that company. We don't want to buy until the summer of 2008 so we still have a little time to clean things up for the both of us. Would you suggest taking the $15,000 I have in savings and paying off my cc debt? Currently I am able to save about $500 a month which at that rate I should have enough for the 5% down payment, closing costs, as well as, 4-6 months of reserves. Our goal is to include him on the loan, but it is nice to know we have another option. BTW I am a teacher in the state of Florida. Do you know of any special programs that would help me out?

[Lady_Scarlet]

http://www.teachinflorida.com/jobCenter/housing.asp?Frompage=finservices

[ShanetheMortgageMan]

What is the rate your $15k is making and what is the rate on your credit cards?  If the savings rate is lower, then I'd suggest paying off the credit card debt... you will likely be able to save more than the $500/mo since you wouldn't be dealing with the minimum payment either.

Hopefully you are able to get the recent collection & 30 day lates removed from his credit, if so then you guys would be looking really good for FHA... and probably even a conforming loan program through Fannie Mae.

How funny, I was just going to bring up the programs from Bank of America... unfortunately though they have strict debt ratio requirements that are lower than Fannie Mae's limit (which is 64.99%).  Bank of America's "TeacherFlex" program allows debt ratios up to 45% with a 720 score, 41% with a 660 score, and 38% with a 620 score... all programs require 1 month of reserves, and they have the higher rate of mortgage insurance (not a community rate, which is discounted).  Contrary to what that website says, 100% financing is possible with the TeacherFlex program.  The Zero Down program (which anyone can do, not just teachers) has debt ratio requirement of 41%, but if the housing expense is increasing less than 25% then with a 720+ score they permit a debt ratio of 45%.  The TeacherFlex has good rates but I'm not crazy about the Zero Down interest rates, as you can get the same rates (but can qualify with higher debt to income ratios) through Fannie Mae's automated underwriting.

Also, by the summer of next year you should see Florida's housing prices be more affordable than they are now... your state and my state are leading the country in foreclosure statistics, which usually help lower values quite a bit.

[ladylpk74]

Shane and Lady Scarlet, based on my situation would you recommend me using a mortgage broker or a bank loan officer. I live in Port Saint Lucie, Florida any recommendations?

[Lady_Scarlet]

I recommend 'shopping' - when ready to buy pull your reports and scores and go in to talk to 1-2 broker and 1-2 bank LOs - see what they can offer you (no credit pulls though) then choose one that you feel good working with..  Once you have the Good faith Estimate go back to the others immediately and see if they can match or beat - then negotiate with the first one.

If you want to go with a Bank - then talk with at least 2 LOs from that bank - you will know when the chemistry is right for working with him/her.

[daisylove]

Correct me if I am wrong but with credit scores that high why can't she do a stated income loan where you state your income and do not have to prove it. Pretty sure she qualifies with credit scores that high

[ShanetheMortgageMan]

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daisylove wrote:

Correct me if I am wrong but with credit scores that high why can't she do a stated income loan where you state your income and do not have to prove it. Pretty sure she qualifies with credit scores that high

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Not without a down payment of at least 5%, and stated income loans are not designed just to list any amount of income, that's what got stated income loans into hot water lately.  lady can do a "no ratio" documentation type, where income isn't listed on the application, but that will also require a down payment of 5-10%.  With $15k in savings it doesn't appear there is enough for down payment + required amount of reserves to qualify.

[daisylove]

Thank you for correcting me. I forgot about having to have reserves.