Do I have a honest chance?

[CreditAngel]

Hi Guys,

I plan on attempting to prequalify for home loan at the end of this year (Nov-Dec) via FHA (current scores FICO TU 706/EQ 658), however; I was concerned about down pymnt. I only had about $5000.00 in savings. So, I sold some stock options recently and received $14k and placed only $10k in savings. Was this a bad move? I also was approved for a $38k car loan and was told that a purchase this large was FOR SURE a bad move. Now I am afraid to use the check. Yes, I do have transportation but really need a new car.

Have I ruined my chances at purchasing a home in 2011? I do have a nice size 401k but I really do not want to use.

FACTS:

Live in Georgia - Loan Amount 250,000

Income $65k

Student Loan -$57k (none in repayment status)

All Revolving credit

$8000 NaviChek- 0

$5000 BOA - 0

$5000 Navy Federal - 947 owed (will PIF this month)

$2000 CAFCU - 0

$500 Cap One - 0

$350 Prem - 0

$350 VS - 0

$250 Prem - 0 (3Lates in 2008)

2Paid 2007 medical collections  170/160 (Only reports on Equifax)
1C/O 2006 $1680 (when I mailed a copy of police report for fraud the OC updated the account with a LATE 2/2010)
Paid 2008 State Tax lien

I have no current rent but I am responsible for all utilities.  I hope have provided enough info to receive MUCH needed guidance.  Thanks!!!

[Anonymous]

Personally I don't understand cashing out the stocks almost 9 months before you are going to apply. but it could also depend ont he market conditions (if you felt they may drop a bti in the near future...)

As far as numbers go here is what I came up with roughly...

income 65K =  5400 gross per month which allows for 2300 or so for all debt.

Mortgage 250K purchase price with 250K financed

1380 P&I

187 PMI

250 taxes

75 insurance  ( I am guessing taxes and insurance)

1893 housing payment which is about 35% (normally they like to see housing under 31% but this can be massaged a bit with good reserves and FICO)

Other debt

300 student loans

300 car loan

200 misc cc minimum payments

2693 total debt load.

49.87% DTI.

Now, if you can get them to not count the loans if you refuse the car loan (not sure if that is even an option once you already have the check) your DTI drop alot but would still be over  a tiny bit.

 It is often times hard to get the to ignore student loans unless you are still in school at the time.  Even then it is a fight.

Lastly, you are going to have an issue with major payment shock.  Whole you have shown some ability to save money up,  that 1900 house payment will be alot closer to 2500 or more by the time you factor in all home owning costs.  Being realistic it is overreaching to take on a 250K loan on 65K salary with other debts in the mix, especially if you have not put alot of money into savings, etc.  Banks do not like to give someone a 250K loan who has no recent mortgage or rental history and who has not used that lack of a mortgage/rental history to prepare for home buying. 

My advice to you would be to skip the car loan.  If you have the 2500 per month that homeownership will cost you, I'd put tha aside for 2-3 months and buy a car outright.  Then spend the next 6 months after that putting an equal amount of cash (at least 2K per month) towards savings to demonstrate to a lender the ability to handle the payment shock...6 months of that expected mortgage payments int he bank with records to shwo the monthly deposit will do 2 things...  Help out with the payment shock issues, as well as build up down payment/reserves for you. 

After you have bought the house and gotten settled in and used to the arrangements, you can always go out and purhcase a better car if needed.

Just my 2 cents.

[CreditAngel]

Thanks so much for the response, your 2 cents is greatly appreciated!

Well, I will say this I have plenty of stock options available to me. Never cashed any out until recently thinking it would make my savings look more attractive.

I really wanted to triple the amount but, after looking at the taxes I changed my mind.

$250k home is my goal but the entire $250k would not be financed. Does this change the numbers drastically in my favor, even with FHA?

Secondly, the car loan check is good for 60 days and the credit union (Navy Federal) advised that if I did not use it no penalty.

I will do the 6 months of actively saving enough equalivent to a monthly pymnt, as suggested.  I plan on pursuing the purchase aggressively at the end of the year so, I have plenty of time (I hope) for preparation.

Thanks.

[Anonymous]

It sounds like you have a good head on your shoulder the only real concern is that running boht a high DTI as well as the payment shock.  I think wither one is manageable, but both might be a bit much to ask.  SO, if you can hold off on the vehicle until after you buy or pick something up used with cash or a smaller amount financed to helpw ith DTI, and still save the monthly payment you will be in very good shape I think by the end of the year.  Good luck.

[oneilldn]

" but really need a new car"

Sorry for my honesty, but it amaze me every time some one use this frase...  as I tottaly believe in Dave Ramsey quote "need and want" are two different things. 

Buy the house first, then buy your $38K car as you really "need" it..... 

For the record, I talk based on my own mistakes....

[mauve]

I think OP means current transportation is unreliable, not that the only option is to purchase a car that expensive.  OP, I'd get a used car that meets your needs, and I'd do it in cash if possible.

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oneilldn wrote:

" but really need a new car"

Sorry for my honesty, but it amaze me every time some one use this frase...  as I tottaly believe in Dave Ramsey quote "need and want" are two different things. 

Buy the house first, then buy your $38K car as you really "need" it..... 

For the record, I talk based on my own mistakes....

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