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08-14-2014 11:18 PM - edited 08-14-2014 11:19 PM
My Income $62,000 a year
My wife incomes is $43,000 a year (Her scores range from 560-580, she doesn't have much depth on her profile other than our auto loans we share and 1 cap 1 credit card. She has 1 collection with LNVN but that we disputed with BBB and got an email today stating that would be removed from all 3 agencies(.
Current mortgage is $860 a month (100% on time since I got the loan in 2012) *my wife is not on this loan*
Merrick Bank $1000/1150
Cap 1 $700/$750
Cap 1 $1300/1500
Cap 1 $800/1000
Car payment $574 (100% on time) *Joint
Car Payment $599 (100% on time) *Joint
Negative items on my report:
WFFNB 90 day past due, last activity 7/2008
Merrick Bank 30 day late 5/2008 after that 100% on time
Paypal 60 day late last updated 7/2008
Barclays (2) 30 day lates 7/2008
Citizens Bank: 60 day May 2008, last updated April 2011. (on EQ it shows the same lates but also notes redeemed repossession)
Cap 1 Card (This was my wifes card, we missed the payment Feb-May of this year). We talked to customer service and they refunded our late fees but no luck getting that removed from her account. It shows on mine as i had my own card on her account. It shows as "not reported"
Medical $296 3/2014 - Not sure what this is
Medical $442 6/2011 - Not sure what this is
My question is what are the lowest scores I can get approved for an FHA loan? What are the max monthly DTI ratio's when trying to get approved? I can pay all of my credit card balances off but that doesn't impact my monthly DTI all that much.
If we sell our current home I'll have some equity to make some payments on my credit cards as well as cover 4% down payment on the purchase of a new home. I'm trying to figure out the best game plan going forward.
08-15-2014 08:10 AM
FHA will go down to a 500 score, but 500-579 scores require a 10% down payment. Not many lenders go below 580/600 though. 620 is still considered the standard that most lenders use.
Max debt ratios for FHA are 46.99/56.99%. A lot of lenders cap out at 40/50% or 45/55%, but there are a lot that still go up to the 46.99/56.99% max.
You should look into the HIPAA program for those two medical collections, or at least the most recent one, since I suspect that is doing the most damage to your scores out of all the negative items you listed. Your nearly maxed out credit cards are hurting the scores quite a bit too.
What is the price range of the new home you'd be looking to buy?
How long have each of the credit cards been open for?
How long have you had each car loan for?
What do you anticipate the minimum monthly payments on your credit cards will be at the time you go to get pre-approved for the new purchase?
How much is the mortgage balance on the existing home and how much do you think it'd sell for?
08-15-2014 08:23 AM
New home: $175k-$225k
The credit cards have been open from 2 years to 9 years old.
The car loans are since 6/2012 and 10/2012
Right now they total to about $300 a month in min payments. After we sell the house I could cut those payments in half or even eliminate all of them if that made the most sense depending on the take home money after the sale is complete.
I owe $140k on my house, I'm hearing I could get around $160-170k for it today. I Planned to use some of the money made to pay down the credit card accounts but that won't do much for my monthly DTI but would help increase my credit score. If we add my wife, we shouldn't have a problem with DTI we'll just need to ensure with the collection being removed she'll jump over 600. She is an AU on my two Amex cards so if we pay those down she'll see a slight score jump as well.
Given this situation, I pretty much have to sell my house to get the DP and also pay down the CC for the score increase. I'll have to sell the house first, then begin the house hunt after that and live in a temporary housing situation right?
08-15-2014 08:48 AM
Your wife should have sufficient credit history, I was afraid she may not have had it for very long.
Not sure where you are buying, but if you pay off the credit cards/sell the home, then your debt ratio should be OK for a $175k sales price using FHA financing... and while it'd be a little over 55% for the $225k sales price, it may still be possible on just your own.
You are correct that once your wife's income is added your DTI will be very comfortable even for the $225k sales price.
If you want your scores to reflect the payoff of the credit card debt, yes, you'd need to sell your home prior to purchasing your new home. If you need them to increase for pre-approval, then yes usually selling/living in temporary housing/buying process would be needed. In the contract when you sell your home, you can ask the buyers to do a "rent back" to you (typically no more than 60 days) so you wouldn't have to move into temporary housing. It'd decrease the pool of interested buyers, but you still may get an offer that comes in at a price so you'd be able to accomplish knocking out the credit card debt. Another option is you could become pre-approved, make an offer on a new home, sell your home, pay off the credit card debt, lender does a rapid rescore to get the higher scores (usually takes 3-5 business days), and then once the higher scores come in then you'd be able to close on the new purchase a few days later... that'd be a pretty precarious situation though.
You may want to make it a goal to pay off the 2 AMEX's (or at least the $900 balance one), get your most recent medical collection removed, get her collection removed... and see where that leaves you. You may just get the score high enough to where you wouldn't need to pay off the remaining credit card debt. Then even with the $800/mo mortgage payment, your debt ratio would be low enough to purchase a $225k home... and could avoid everything I described in the above paragraph.
08-15-2014 10:42 PM
I didn't think I'd have a chance in hell to get approved if I didn't essentially pay off all of my credit card debt. The goal for now is to work on those collections and knock out that $900 balance Amex. Thanks for taking the time to answer.
08-16-2014 10:47 AM
08-17-2014 09:11 PM
I might be able to trade in one of my cars and lower my montly payment by at least $100 a month. Is that worth it, or should I just wait it out with my current monthly DTI untill after we buy a house?
08-18-2014 11:04 AM
The high balance to available credit is what is causing your scores to stay down.
Pay off the balances, leave one card with a 1-9% balance (of total revolving credit for the card) and you'll see a nice bump in score.
08-21-2014 05:26 PM
With the scores you have now I wouldn't suggest applying for any new credit until after you have closed on the new mortgage.
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