Could I qualify for a mortgage and how much?

Anonymous · ‎02-17-2015

I am in the process of rebuilding my credit and there are a few short term changes I can make (bring down utilization from 95% to 1%, etc.) that hopefully will give my score a boost. My current scores are 608, 604, 600 and hoping to get them to near 700 by end of the year. We'll see if this happens.

Anyways, I would like to apply for a mortgage at the end of the year with my scores close or at 700. My wife's credit is solid she is in the low 700s.

Gross Household income is about $195k.
The only debt I will have at time of application will be my student loans ($180k) and hers (about $30k). No credit card debt or other loans. Total monthly payments for the student loans are about $1200 (me) and $200 (her).
One car payment @ $430/month
Have $65k in 401k account (not sure if this counts towards savings?). And $13k in a pension account.
Have about $150k to put as down payment (part gift, part savings)
Have $15k in other savings
Solid job history and verifiable income...work for large corporation for 5+ years. Wife also has good job history.

We will be first time homebuyers. Live in a high COL area so I'm looking at a $600k-$700k mortgage amount on top of the $150k (20%) we will put down. Would prefer to stay with a conforming loan if it means better rates.

first question is will I even qualify and second question is does that amount seem unreasonable? Appreciate any input.

frugalQ · ‎02-17-2015

have you tried checking various mortgage calculators to see how much you may qualify for? also, your scores seem low for your income/employment history. do you have major derogs on your report? if so, have you addressed them? you want to make sure you've addressed all issues before you start the home buying process.

you should also check to see what the conforming limits are in your area. I'm assuming it over 600k since you said you live in high COL area. If you purchase a home for 750k with 150k down, your LTV will be 80% which is great because you would not have to pay pmi.

If your DTI will support the house payment on a 600k loan (i'm assuming property taxes will be high), and your credit report is scrubbed, then getting above 700 seems to be your only issue.

now, if you purchase a home for 850k, then you will have to consider PMI as the downpayment is less than 20% which will increase your housepayment and DTI.

if your downpayment is coming from a gift, i suggest (if possible) you have the funds in your account for at least 2 bank statement periods before applying. otherwise, you will have to source where the funds come from.....and that may requiire having to show bank statements of the person gifting you the funds.

skigirl916 · ‎02-17-2015

@frugalQ wrote:
your scores seem low for your income/employment history.

Um. Income and employment history have no bearing whatsoever on one's credit scores.

Revelate · ‎02-17-2015

@skigirl916 wrote:
@frugalQ wrote:
your scores seem low for your income/employment history.

Um. Income and employment history have no bearing whatsoever on one's credit scores.

Absolutely, but I think what frugal was getting at was simply that those are depressed scores, likely with derogatories which may impact mortgage underwriting. Money makes all things easier when it comes to either maintaining credit or rebuilding it, though of course there's billionaires with scores less than even where I started... certainly having the ability to pay for one's monthly expenses in cash makes it fairly trivial to PIF adroitly.

@OP: If you haven't already check over in the rebuilding forum to see what you can do regarding cleaning up your reports as mortgage underwriting is going to take the lower of you/your spouse's middle scores... and the higher yours are, the better rate and the easier the qualification process.

Anonymous · ‎02-17-2015

Thank you for the reply. Indeed you are correct that my low scores are mainly due to a couple derogs. I have a 90 day late on a student loan from July 2014. Other than that there are a few 30 day lates on cc all from several years ago. And a paid-closed cc from 7 years ago that I hope will fall off later this year. There is not much I can do with the derogs the main thing is to pay down the cc and a line of credit account. My FICO score simulator has me up to a 764 if I pay it all off over 2 years.... and up to a 704 if paying everything down rather quickly.

I think the credit issue is a whole other topic/thread so I didn't want to include too many specifics.

Let's just assume I can get my credit score up the 700 neighborhood by the time I apply for a mortgage. With the other factors I listed (income, debt, savings, 20% down etc.) I was wondering how I would look to a lender when applying for a large loan amount.

I don't want to pay PMI so that's why I'm paying 20%.

My DTI seems like it would be okay: 16,250 is income. Debt would be $1400 (student loan) + $430 (car) + housing P&I, property tax. I'd like to keep my total housing payment close to $3500-$3700 max. Property tax should be about $7000-$8000 a year. So add $650 to a mortgage payment around $3k. At $3700 housing, my DTI as I calculate it would be 34%.

frugalQ · ‎02-17-2015

@Revelate wrote:
@skigirl916 wrote:
@frugalQ wrote:
your scores seem low for your income/employment history.

Um. Income and employment history have no bearing whatsoever on one's credit scores.
Absolutely, but I think what frugal was getting at was simply that those are depressed scores, likely with derogatories which may impact mortgage underwriting. Money makes all things easier when it comes to either maintaining credit or rebuilding it, though of course there's billionaires with scores less than even where I started... certainly having the ability to pay for one's monthly expenses in cash makes it fairly trivial to PIF adroitly.

@OP: If you haven't already check over in the rebuilding forum to see what you can do regarding cleaning up your reports as mortgage underwriting is going to take the lower of you/your spouse's middle scores... and the higher yours are, the better rate and the easier the qualification process.

I realize that income/employment history has no impact on credit scores, but at 195k annual income and at the job for longer than 5 years, it seems his scores would be higher...especially since his wife's scores are high. OP didn't mention it, but i'm assuming his scores may be low because of credit issues. I'm just pointing out the fact that if there are any derogs on his report, they will need to be addressed, if they haven't already done so.

i could be way off in my assumptions, but it's still worth pointing it out.

disdreamin · ‎02-17-2015

kokings wrote:My DTI seems like it would be okay: 16,250 is income. Debt would be $1400 (student loan) + $430 (car) + housing P&I, property tax. I'd like to keep my total housing payment close to $3500-$3700 max. Property tax should be about $7000-$8000 a year. So add $650 to a mortgage payment around $3k. At $3700 housing, my DTI as I calculate it would be 34%.

Are your property taxes really that low?! If you are truly in a high COL area in general, I'd double-check those numbers. That tax estimate is more in line with a property assessed at around $250K where I live. Just something you'd want to look into for sure.

Anonymous · ‎02-17-2015

Yes, I believe property tax is 1.1% of the assessed value.

skigirl916 · ‎02-17-2015

@frugalQ wrote:
@Revelate wrote:
@skigirl916 wrote:
@frugalQ wrote:
your scores seem low for your income/employment history.

Um. Income and employment history have no bearing whatsoever on one's credit scores.
Absolutely, but I think what frugal was getting at was simply that those are depressed scores, likely with derogatories which may impact mortgage underwriting. Money makes all things easier when it comes to either maintaining credit or rebuilding it, though of course there's billionaires with scores less than even where I started... certainly having the ability to pay for one's monthly expenses in cash makes it fairly trivial to PIF adroitly.

@OP: If you haven't already check over in the rebuilding forum to see what you can do regarding cleaning up your reports as mortgage underwriting is going to take the lower of you/your spouse's middle scores... and the higher yours are, the better rate and the easier the qualification process.
I realize that income/employment history has no impact on credit scores, but at 195k annual income and at the job for longer than 5 years, it seems his scores would be higher...especially since his wife's scores are high. OP didn't mention it, but i'm assuming his scores may be low because of credit issues. I'm just pointing out the fact that if there are any derogs on his report, they will need to be addressed, if they haven't already done so.

i could be way off in my assumptions, but it's still worth pointing it out.

Why though? You're linking his income and job history to his scores. And why would his scores be higher if his wife's were higher? OF COURSE his scores are low because of credit issues - that's the only reason they could be!

I've been in my job for 15 years and earn well over 6-figures, and 18 months ago, my scores were under 600. Why? Because I was stupid in handling money and timeliness of paying my debts. My income/employment had nothing to do with my scores. Nor did my now-Ex's very high scores play any part in mine.

skigirl916 · ‎02-17-2015

@Anonymous wrote:
Yes, I believe property tax is 1.25% of the assessed value. So maybe closer to $10k on a $800k value.

That's about what they are for me, as well.