Can we qualify?

[erinbean28]

Ok, first time home buyers here and we are wading through all of the information trying to decide if this is even possible within the next three months. We went into a Navy Federal branch yesterday to get information and it was a toal waste of time! We are interested in a FHA 203K loan (we want to buy a fixer upper), but would be interested in a traditional FHA loan as well.

We will have $13,000 roughly to put down on a home and plan on purchasing in the $375-400K range.

Credit scores:

My income: $50k annually

My Expirian FICO is at a 615

I have one collections account which I will be paying off next week (PFD) and will have deleted.

I have one Student Loan with a $2,000 balance which I defaulted on in 2004. I am in a loan rehab program, but have another 6 months before that program will be complete.

My husband's income: 100K annually

My Husband's Expiran FICO is at a 605

My husband has 2 collectioms accounts which we will be paying off next week (PFD) and will have deleted.

We have $1300 in monthly payments for our auto loans, credit cards and furniture loans.

We owe $ to the IRS for taxes, but have a payment arrangement which we are paying ontime. Our monthly payment to the IRS is $212.

In the event I can not qualify for the FHA loan since I have a student loan in default we are ok proceeding with just my husban's information and leaving me off of the loan, but ideally we both want to be on the loan.

Any feedback on things we can be doing in the next 3 months to improve scores would be GREATLY appreciated! We are also interested in learning about different mortgage programs available for people in our financial situation.

Thank you so much!!!

[Anonymous]

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@erinbean28 wrote:

Ok, first time home buyers here and we are wading through all of the information trying to decide if this is even possible within the next three months. We went into a Navy Federal branch yesterday to get information and it was a toal waste of time! We are interested in a FHA 203K loan (we want to buy a fixer upper), but would be interested in a traditional FHA loan as well.

We will have $13,000 roughly to put down on a home and plan on purchasing in the $375-400K range.

Credit scores:

My income: $50k annually

My Expirian FICO is at a 615

I have one collections account which I will be paying off next week (PFD) and will have deleted.

I have one Student Loan with a $2,000 balance which I defaulted on in 2004. I am in a loan rehab program, but have another 6 months before that program will be complete.

My husband's income: 100K annually

My Husband's Expiran FICO is at a 605

My husband has 2 collectioms accounts which we will be paying off next week (PFD) and will have deleted.

We have $1300 in monthly payments for our auto loans, credit cards and furniture loans.

We owe $ to the IRS for taxes, but have a payment arrangement which we are paying ontime. Our monthly payment to the IRS is $212.

In the event I can not qualify for the FHA loan since I have a student loan in default we are ok proceeding with just my husban's information and leaving me off of the loan, but ideally we both want to be on the loan.

Any feedback on things we can be doing in the next 3 months to improve scores would be GREATLY appreciated! We are also interested in learning about different mortgage programs available for people in our financial situation.

Thank you so much!!!

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$13k is below 3.5% for FHA on a $375k loan. You'll need to either reduce what you're looking for to a maximum of $371,428 or plan on increasing your downpayment reserves to $14k (meets the 3.5% requirement at $400k).

Why do you need to be on the loan? Based solely on DTI (assigning all the monthly debt to your husband and using just his income), back end DTI comes out to around 39.5% so he could qualify for this on his own (from an income standpoint). You can always be added to the title. 

More seasoned members should probably chime in but it seems to me that if your credit will adversely affect the chances of qualification, it's better to focus on improving his score and have him apply solo. 

You should also plan on saving a bit more beyond your downpayment. Not sure how closing costs are handled for you, but there's potentially some of that, appriasal, and other costs you'd need to front on top of the down payment.

Finally - which FICO score is 605? Make sure you're looking at a mortgage score, and not FICO-8.

[madmann26]

Ideally,

You want a mid-score of 640 for FHA. Sure, you can get approved with a score as low as 580 from some lenders but you also have to fork out more money for the downpayment.

Then there is mortgage insurance which will more then likely be sky high. I would suggest going to http://annualcreditreport.com and pulling each of your reports (totally free) and see what is reporting.

I would also suggest visiting the Rebuilding Forums and reading on how to boost your score. Often times, it takes time and you have to be patient. It will not happen overnight.

The short version,

I'd wait until your scores are in the 640 range to comfortably qualify for FHA.

[Anonymous]

DTI is a little high, especially with your husband alone, but it should be fine. Front end is also fine. It is hard to tell what sort of rate/would you be approved until after the deletes come off. The biggest issue appears to be your down payment. However, with your current debts and incomes, you should be able to boost that considerably by the time closing comes around. The higher you can get the down payment, the better the rate you'll get and (potentially) the less time you'll have to pay PMI. But, as a general question, yes, you are capable of qualifying for an FHA loan.