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Do we qualify for mortgage

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amanda1266
Valued Member

Do we qualify for mortgage

Hello. My husband and I want to buy a house but I don't know if we stand a chance with getting approved.  Here is our information:

Credit.  Me: about 675. Hubby about 700
No lates, bankruptcy or anything else negative. We do have a couple credits cards I am working to pay down.

Income: I am self employed. I made 23,000 in 2012 after expenses(first year self employed). I made 60,000 in 2013 and expect to make even more this year. Hubby makes about 50,000 a year.

Source of income. My income is from self employment 2 years and hubby income is from employment where he is paid hourly 6 years.

Monthly debt payments. 
2 car payments $255 and $335
Credit card $150 minimum
School loan $145
Mortgage for house we need to keep because we owe more than its worth $1150

Assets/Reserves.
Savings $20,000
401k $25,000

Location.  Maryland, Cecil County

Property. Single family, trying to decide between pre owned and new construction. Will likely be 1/2 acre or less. Will be in good condition and should qualify for USA rural area but our income might be too much for that.

Value. We would like to stay under $300,000.. not sure what we can get approved for.

Occupancy.  Primary residence

Transaction Type.  Purchase
Message 1 of 4
3 REPLIES 3
ShanetheMortgageMan
Super Contributor

Re: Do we qualify for mortgage

Since you have to retain your existing residence, your debt to income ratio is going to be pretty high on the new purchase.  Probably would be too high for conventional financing... as even with 10% down + paying the PMI premium at closing (rather than monthly) I am calculating it to be a little over 50%, and generally 45% is the max that would qualify (up to 49.99% can qualify for exceptionally strong borrowers, i.e. excellent credit, usually 20% down, and a lot of reserves).  Plus conventional would require you have 6 months PITI in reserves for both the new + departing residence since you aren't selling it prior to closing and you don't have 30% equity.  May need to go with FHA financing, which would not require any reserves and can permit a debt ratio up to 56.99% to qualify.  With FHA the debt ratio would be around 55.7%, so you are going to be real close to the max as well.  So it's possible, it's just going to come down to how much the property taxes & insurance are.  I am estimating $900/year for insurance & $4,500/year in property taxes.  If it's a little over then you can put 5% or 10% down with FHA to reduce the payment and get the debt ratio within the limit.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 4
amanda1266
Valued Member

Re: Do we qualify for mortgage

HI Shane,

Thanks alot for your reply.  We are toying with the idea of selling my husbands truck which would eliminate his truck payment and we could also pay off my car.  Would eliminating both of our car loans help any?

Message 3 of 4
ShanetheMortgageMan
Super Contributor

Re: Do we qualify for mortgage

Yes, that would drop your debt ratio considerably.  Most likely enough to qualify for conventional financing with 5-10% down.  With FHA that would drop the debt ratio by 7%, much more breathing room.  Before you pay them off, you can see what you can qualify for with the payments still there... and if that doesn't work, then your loan officer can play around with paying 1 or both off and see what difference it would make.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 4
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