Do I Qualify for a Mortgage?

[Kay_Cee]

If you mortgage professionals would kindly comment, I would apprciate it.  Here is my situation:

Credit:Current FICO score is 704.  I have 14 open credit/charge accounts and two car loans.  There has never been a late payment on any of them and several report a balance evey month, but I pay the balance in full with the exception of a Citibank card with no interest for 21 months, an Amazon card (no interest) and and my United Visa. Both the Visa and the Amazon card should be paid in full by the end of March.  Leaving me with about $1800 on my CitiBank card.  One car payment is mine, $400 a month, and the other car is financed in my name, but really my sister's car.  She pays me $350 a month and I make the payment.  Negatives include a satisfied medical judgement which will fall off next year.  In the past, I have had some tax liens.  A state lien from Massachusetts, which has been satisfied and two federal liens.  I entered into a payment arrangement with my good friends at the IRS and I pay them $135 per month.  I have been doing so since July of 2011.  Pulled all three credit bureaus within the last three months and the Federal liens have disappeared; the satisfied State lien is still appearing on Experian.

Income:Gross income last year totaled $64,200 with overtime.  Expect to make comparable income this year

Source:Income derived from W2 employment and three years with the same employer and a small ($382 per month) pension.  

Monthly Debt Payments:My car payment of $391.22 per month to PenFed, $135.00 to my friends at the IRS and one minimum payment of $35 per month to Citibank.  The second car has a monthly payment of $322.00 but my sister makes the payment to me for $350 a month and I make the payment to Hyundai Motor Finance.

Employment:I am a W2 employee with almost three years with the same employer.  Prior to that I did contract work as both a 1099 and W2.

Assests:Currently have about $7,500 in a 401 K and expect to have $10,000 there by the end of May.  I would use what I needed to from there for the down payment and am hoping to be able to get an FHA loan.

Location:DuPage, Kane, Kendall or Will county Illinois.  They all kind of merge in this area and I am looking in all of them.

Property:I am looking at two and three bedroom, two bath townhouses with the year built of 2001, or later.  I don't want to have to do much more than paint and definitley don't want to have to rehab kitchens and baths.  Ideally it would be a 4 unit building but would consider buildings with as many as 6 units in it, as long as it doesn't look like an Army barrack.

Value:I am hoping to stay below $180,000.  Most of the places I am considering are priced around $135,000 to $160,000, but if I qulified for it and the palce was right, I would go to $180,000.  I currently pay $1255 a month for rent and also pay all my utilites, including water, so the payment with taxes, insurance and condo fees needs to come in around that amount, or less.

Occupancy:Primary

Transaction Type:First purchase of a home

I know the tax situation is going to come up and one I'll have to deal with.  The total liabilty is around $60K; $45K in taxes and penalties, $15K in interest.  While I could apply for an abatment on the interest or do an Offer in Compromise, I'm thinking it is better to let the collections statue expire.   The years for which I am paying are from the 90's and early 2000. By continuing to pay them monthly,  the tax liabilty falls off and becomes uncollectable within the next two years.  

Any feedback you can give me is appreciated.

Thanks!!

[Kay_Cee]

Bump

[JM-AM]

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@Kay_Cee wrote:

Bump

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Since your situation is a little tougher I am sure most are waiting on the more knowledgeable mortgage representatives that frequent MYFICO to respond. Be a little patient as they are busy at times also.

[Anonymous]

I am not an expert or LO and I did not actually calculate your numbers but this does look like a tough one. your sisters car is in your name and on your credit report. I don't think it will matter that she actually mkes the payment they will calculate that into to your DTI. Also be carful with the income you mentioned with overtime. since it is January it can be easy for you to get close to what a LO will use as your income. Take your last 2 years gross pay add them together and divide by 24. i.e. $64,000 in 2011 and $57,000 in 2010 = $5041 gross income per month. since overtime is not guarnteed they are looking for a repeatable average.

There are some good calculators online look for a mortgage affordablity calculator. Mortgage payment (including taxes homeowners insurance, and PMI) should be 29%(this is called the front end)  or less than monthly gross. ALL monthly debts (including your sisters car) and the minimum payments an ALL your credit cards (this is called the back end). should be around 40% or less. I think some programs like FHA go higher than 40% though. Again I am not an expert but friendly advice from a homeowner you really don't want to go much higher than 40% back end.

Best bet I think is you need to find out if your sister making the payment to you can be included in your income (Im thinking probaby not) Can your sister get her own loan now and take over the payments on the car? that $350 a month is really going to hurt your chances.

Good luck to you.

[boomhower]

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@Anonymous wrote:

I am not an expert or LO and I did not actually calculate your numbers but this does look like a tough one. your sisters car is in your name and on your credit report. I don't think it will matter that she actually mkes the payment they will calculate that into to your DTI. Also be carful with the income you mentioned with overtime. since it is January it can be easy for you to get close to what a LO will use as your income. Take your last 2 years gross pay add them together and divide by 24. i.e. $64,000 in 2011 and $57,000 in 2010 = $5041 gross income per month. since overtime is not guarnteed they are looking for a repeatable average.

There are some good calculators online look for a mortgage affordablity calculator. Mortgage payment (including taxes homeowners insurance, and PMI) should be 29%(this is called the front end)  or less than monthly gross. ALL monthly debts (including your sisters car) and the minimum payments an ALL your credit cards (this is called the back end). should be around 40% or less. I think some programs like FHA go higher than 40% though. Again I am not an expert but friendly advice from a homeowner you really don't want to go much higher than 40% back end.

Best bet I think is you need to find out if your sister making the payment to you can be included in your income (Im thinking probaby not) Can your sister get her own loan now and take over the payments on the car? that $350 a month is really going to hurt your chances.

Good luck to you.

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Actually the car isn't that big of a deal as long as he has the proper documentation.  As long as he is depositing the checks into his checking account and there is the pattern of it he can count it.  It shouldn't be a problem at all.

[Anonymous]

Good to know as I said I was not sure how it would work if they would include the payment from the sister as income. To play devils advocate though is there  a time frame they want to see to consider the payment as a "pattern" from the sister. i.e 1-2 years???  if this is a new loan and the sister has only made 6 months of payments maybe it will not be included?

Good luck Kay_Cee its a nice area your looking in and is a great time to buy a home in that market. I bought in this very genral area in 2004 and homes are averaging 30% less now than in 04. lots of foreclosures and short sales out there too

[Kay_Cee]

Thanks for your feedback and I am waiting for one of the mortgage pros to respond.  Regarding my sisiter's car loan, we will be at two years this May.  Part of the original deal was that they re-fi it ASAP.  Apparently, that is more of a priority for me than them, but they do give me the check like clockwork and I can show the pattern of deposits.  

Once I hear from one of the pros, I'll let you know what I decide to do.  While I'd like to get into a house sooner rather than later, I have time.  The market isn't going to start going up anytime soon, I'm afraid.

[DallasLoanGuy]

how much are property taxes where you are looking?

[ShanetheMortgageMan]

If you are able to use all $64,200 of income to qualify + the $382/mo pension then your debt to income ratio looks OK to qualify for a $180k sales price, even assuming property taxes of $4,500/year... debt ratio would be in the low to mid 40's.  I am not sure you'll be able to get a payment comparable to what you are paying in rent on a $180k sales price though, taxes aren't cheap in your area and then you have a homeowners association fee to include in the payment amount as well.

That is a rather large tax liability, you have only been making payments for roughly 6 months it appears, so it's an underwriter's call if they would allow it to remain unpaid or if they'll be OK and just include payment in your debt ratio.  Having past sastisfied federal tax liens doesn't help your case, but since there are no current federal tax liens it would be possible to purchase without having to pay back the ~$60k that you owe.

Since the tax liability appears it's the big issue, I'd make sure you have a detailed letter of explanation regarding when the liability was incurred, why it was incurred, and what measures you have taken to make sure you won't have future unpaid tax liability.  You'll also need the terms of the payment plan + a payment history from the IRS (which I believe you can request they mail to you).

[Kay_Cee]

Anywhere from $3,500 to $5,500.  Ideally, I can keep my payment around $1300.00  I just learned of a downpayment program administered by the state  which allows up to $6500.00 for down payment assistance in the form of a low interest forgivable loan.  If I stay in the unit for 10 years, I don't pay it back.

Any feedback you can give me is very much appreciated!