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My wife and I are saving for a down payment on our first home, which we're hoping to buy in early 2012. She has a lot of student debt (~$100,000) but a 700+ credit score and a student job that is paying $30,000 annually plus a living stipend of $10,000 and is nearly finished with her doctoral.
I make $46,000 a year, my credit isn't nearly as great (620 TransUnion, haven't pulled Equifax) but I do have a defaulted federal loan with the US Dept. of Education that will be completing rehabilitation in the first week of December, 2011. I have $30,000 total in old student debt that is being paid on at a pretty rapid rate. I'm well aware that it is an impossibility to get approved for an FHA loan with a federal default on your record. This should be expunged by this time (hopefully).
We'll have roughly $15,000 available for a down payment if needed, but we're not looking to spend a lot on the home and we're hoping for a 3.5% down payment.
What are our chances of getting approved for a loan in December or January of 2012 with this kind of info? I'm mostly concerned with the defaulted student loan getting paid off and the $100,000 in student debt from my wife that may scare lenders away.
I am not sure about the student debt. I can only tell you about my experience (which may or may not be relevant to your situation) Prior to some financial hardship after a divorce my $19,000 in student debt hung around my neck like an anchor! I couldn't even buy a cheap car without the dealer wanting my ex with his 40% debit ratio to co-sign: I said forget it! I could never get my credit score above above a 710, and that was with just the mortgage and the student loan and total debt ratio of 28% with an income of $72,000 and no late pays or delinquencies. My ex was a whole different story, no student debt, but credit cards that pushed his total debt ratio to well over 40% and a income of less than $40,000, and his score was a 740. I guess it just depends on the mix she has. (Of course now the situation is entirely different, this when times were good, prior to recession and divorce).
As long as the student loan is rehabbed/on time on credit by the time you apply, that shouldn't cause any problems.
The payments on your debt factor in to what you can qualify for. By January of 2012 - how long will your wife been working at her student job for? Or will she have new employment then? If it's new, will it be relating to what she is doing now and/or what she'll be getting her degree in (if she gets the degree prior to you buying the home)? I assume you've been at your job, or in the same industry for 2 years.
The federal loan will be rehabbed by that time, and everything will be on good terms. $0 in credit card debt for either of us, or any other type of debt other than student loans. Total income between the two of us comes to roughly $3,000 less than the maximum income cap for FHA loans in our county.
By January of 2012, and through the remainder of 2012, my wife will have the student teaching job...she wants to be a college professor and will be teaching classes in her field of study. By then, I will have also been at my job for two years.
I did briefly speak to someone at our bank today as well, the branch manager subtlely tried to steer me away from FHA loans. As a lender, is it a lot of extra hassle to deal with them? I'm relatively certain we couldn't get a respectable rate with a conventional mortage by that time.
FHA loans are no more of a hassle than conventional loans. If you have less than 20% down conventional loans can actually become more difficult of an approval process since mortgage insurance is typically involved and so the mortgage insurance provider also reviews your loan. With 720 scores and 5-15% down conventional should definitely be considered.
There are no income cap for FHA loans, you may be referring to the HUD median income limit or an income limit to qualify for down payment assistance or something along those lines, but to get an FHA loan you are fine to make millions per year. There is a loan amount limit, but not an income cap limit.