FHA Mortgage Approval in 2012 - Help me Get Ready!!

[Anonymous]

That is possible of course.  Some places will talk to you based on that, and others will not.  I was mainly cautioning against wasting ANY inquiries right now.

Also, as I had mentioned before in another post, I think OP is overdoing it right now as no answers are really going to be worth much at the moment.  What OP needs to do is pay down debt and, get DP saved up, and get SL's paid down.  Currently DTI would be borderline but probably close enough.  That said, close enough with 90K in default in recent history is probably going to be an issue.  Especially without substantial assets or high FICO (currently about 80-100 points below required amount and from what I can tell little or no CC that can be paid down to raise score to 650 or so needed for a loan.

My point is that talking to a lender and worrying about the minutiae of buying a home at this time is going to drive OP crazy over the next 2 years, and yeah, realistically I think it will be 18 months to 2 years before OP will qualify for 300K purchase...for a couple reasons:

90K in default

Husbands job is hourly so they will average 2 years pay and one year was 12K.  If it does switch to salary that may or may not affect things a little bit, but not a ton..

DTI is going to be borderline and maybe over borderline if rates continue to go up in a year

Current midscore in the mid to high 500's with no quick fixes for score: i.e cc to be paid down (it could easily take over a year to see this improve, especially as all extra money needs to go to the SL's and paying charge offs does not help score at all...)

Paying off SL's is quite possibly going to be a requirement.  SL's generally have to be rehab'd or paid and the OP said lender will not rehab loans...they will show as defualted until paid off, unlike normal collections or c/o's which can just be under a payment plan usually.

No shown savings at this point and how are they going to save 20+K while paying down the SL's enough to let the UW pass it as well as likely needing to pay off 1 of the loans (car or personal) to lower DTI.

Again, the OP is free to do whatever, but what needs to be done is very obvious and generally speaking LO's are not the best places to look for advice on credit issues.

To have a solid chance of getting a loan in a year I feel  the OP would need to:

Pay off one of the loans to lower DTI (again very important if rates keep going up...at 5% they might squeeze by DTI wise dependin on insurance rates right now and depending on how income was factored but I still do not see them approving a maximum DTI amount unless the SL's are paid off.  If they are still in the mix I would expect the UW to want to see lower total DTI in the range of say under 40 to use as a compensating factor against the CO loans

Keep up the student loan payments with a very accurate record of them and letters from ALL the lenders as to the payment arrangements made Ideally paying them down quite a bit more than the minimum payments

Save up the 20K down payment and closing costs

Additionally, save up any difference in what they are paying in rent now, to what they expect to pay in mortgage (2700-2800) so LO/UW do nto worry about payment shock, as well as a way to bolster reserves) 

Find a way to raise FICO the 75-100 points needed to qualify in the first place.

All this is just a matter of sitting down with personal finances and deciding how much you can put to what and getting it done.

For example sake/DTI, here is an expected breakdown of costs..

Current liabilities = 3K per month....

300K mortgage with 290K financed for 30 years at 6% (a likely rate a year from now, if not more)  I would not be surprised to see 6.5-7% rates and every .5% is 100 per month at 290K.

1750 P&I

625 taxes (OP's quote of 2.5%)

225 PMI (.9% per year)

100 Insurance

2700 mortgage payment.

5700 monthly minimum debt.

Income

112K

35 K (2 years averages)

11K SS income)

158000

43% DTI = 5661 for debt maximum

So they are right at the limit (assuming insurance is accurate, rates do not go up more than 3/4% in a year, no HOA's etc.)

But again, with 90k in defaulted debt, even if they are willing to accept the payment arrangements, they are very likely to want to see reserves and low DTI to offset the default as well as the low FICO.  OP may benefit from trying to open a secured CC or two to develope tradelines and add to score.  Without revolving credit it takes a long time to raise FICO just paying loans on time.

Again. Just being honest.  OP would be better off spending the time just concentrating on paying off every penny they can over the next 12 months and then sit down about this time next year with a LO and figure out what is next.  Otherwise OP will be burned out, stressed out, and have spent countless hours thinking about something that noone can  give a real answer for about 11 more months.  Once those SL's have been in a payment plan for a year, money has been saved up, FICO has improved, etc then the question become answerable.  Right now they are not because too many things are based on the assumptions of stuff.  Any LO that would tell someone now that they can do something for them in a year is just shining them on.  Any decent LO is going to tell them to take car of their stuff, and contact them when they are about there.  Maybe the end of this year or so and start looking into it.

One note i would make is to find the smallest SL's that you owe money on, and talk to them about PFD.  If you have any really small ones you could arrange that for right way, that may be a way to get a few extra points quickly on FICO and drop a few % in DTI...Maybe enough to avoid needing to pay off the personal or car loan.  Other than that, open a secured CC or two, use them sparingly and pay them off the same week (leaving a few dollar balance on one each month) and just knuckle down and keep pluggin away on the SL's, one of the loans, and savings/reserves.  That really is all there is to do at this point. 

[mauve]

I may be remembering wrong, but I'm pretty sure MB had CCs to pay down for that utilization bump - I remember thinking she had a realistic shot at her goal score based on that. 

[Anonymous]

Nothing listed on the top of this post.  Just the SL's and 2 loans.  If there are alot of CC, then that even makes the DTI harder to do, and paying everything else down that much more difficult.

[Anonymous]

Again, I jsut do not feel that with the default, minimum marks are going to cut it.  Minimum FICO, high DTI, husband with short (though post college) job history, etc.  And OP worrying about it now is just counterproductive.  ALso, I think the OP, with the current debts owed, probably needs to concentrate on long term financial ideas like getting it all paid off and CC than figuring out how to take on 300K in more debt at this time and work towards the time when those 2 goals meet, not adjust one goal to make the other happen.  Again, to each their own and I do not mean in nay way to judge OP.

[MBOhio2]

Wooowww nelly... I am not nor will I be stressing about this for the next 2 years. I'm a working mom of an ADHD child with a very high-demand, high-pressure job so it's going to take a lot more than planning to buy a home to ruffle my feathers

I'm a Type A planner and like to think ahead, do the research, etc. As I've mentioned previously, I'm just picking apart each item and trying to learn as much about it as I can so I'm fully informed and prepared for the next step when that comes. There is no stress here Also, we currently rent a home in the same area where we want to buy and our current lease expires in Nov 2011 so I do want to be more prepared by that time so I know whether we should renew for just 6 months or a full 12 months. That's a very long time away, but again, I like to be prepared and be thinking ahead.

As for CCs, I have 5 CCs with a total of $14K in CLs. My current scores are based on 126% util, haha, (one CL was lowered making it's balance way more than the CL) so my util % will be "off" until that CC is paid. However, I currently owe $10.6K on about $14K in CC debt. I've been paying the CC down over the past month and I just paid $800 to one CC today to pay it off and have a budget (you should see my personal finances spreadsheet!) to pay down the other about $10K over the next 3 months. None of these CCs have ever had a late payment. As a result of the complete pay-off in a few months, I expect to see a large score increase, which I think will put me at the 640 I need. We will have no CC debt and therefore, no payments due, when we apply for the mortgage.

Paying off the personal loan is also very do-able though it would take away a little from our savings. We have a large surplus between our current income and debts so we have the ability to pay down a substantial amount of debt and still easily save $20K (maybe even closer to $30K) over the next 14 months, especially if my husband gets the permanant teaching job at the private school that he's currently interviewing for.

I have very specific and detailed documentation regarding the payment plans on all CO SLs (all with the same lender). I actually do have one CO SL that is for just $1K and was planning to test a PFD with them next month to see if they'll bite. If so, I could get probably about 4/11 COs completely off my CR by the time we want to buy next year.

If rates go up a lot or if DTI becomes an issue, we'll buy a cheaper house

And finally, about the meeting with a LO, I was not going to have them pull my CR... I have zero inquiries on my CR and don't plan to add any. I was just hoping to sit down and have an exploratory conversation with a LO at our CU and show them my own printed-off CRs, which the LO has already agreed to do. Maybe I learn nothing from it, but I think it's helpful to better understand the CU's UW standards.

I don't feel judged. Again, I appreciate the candid feedback. I'm not looking for "answers", but just advice on how I can improve in order to be most likely to be approved for a mortgage