FHA w/ low scores & 10% down payment

Anonymous · ‎12-31-2009

Good Morning,

I’m hoping someone can give me some advice. The house I am currently looking at is currently $70000. It appraised around $125000. I does however need some work such as new flooring and some updating in the kitchen and the bathroom. I have a down payment of $7500 that is coming from a community organization. I think the only loan I may be able to qualify right now for is an FHA.

My scores are 631, 550, and 600. I am hoping that when I pay off my revolving balance this month before it reports, my score will increase me above 620 middle score. My question is if the scores don’t change what is the likelihood that I could be approved with my current scores? My down payment is just over 10.7%.

Also, does anybody know if the streamline 203k loan has additional credit requirements and how long does it take to close? Thanks for all your help.

Anonymous · ‎12-31-2009

Just as some added information. My current income is $43000/year. The mortgage payment with ins. and taxes would be around $550. I figured my diti ratios would be 15.8%/29%. I currently have a truck payment w/ a monthly payment of $488. Only 15 months to go. One credit card with $207/250 reporting. This is what I paid down to $0. The only other things bringing my scores down is 6 medical collections from 2006 that I am working on getting deleted through the HiPAA process, but wanted to see if there would be any chance I could qualify now for the loan. THank you.

Anonymous · ‎12-31-2009

Most lenders are looking a minimum of 620 for FHA and some have even raised their minimums. Personally I would wait until you see if you can get those collections off your report before moving forward. I'm not an expert though so good luck and happy new year.

Jazzzy · ‎12-31-2009

I agree with the above advice. It sounds as if you are doing the right things to try to raise your scores...but...the hardest part of credit rebuilding is patience.

I would worry that if you start applying now, you will end up with inquiries on your reports that could give you a further point loss...and likely for nothing. If you are being told what your middle score needs to be, it could hurt your scores if you apply before you reach that level. You don't want to do anything at this time that costs you points.

Anonymous · ‎01-02-2010

Does FHA consider a downpayment greater than the minimum a plus?

Anonymous · ‎01-06-2010

@Anonymous wrote:
Does FHA consider a downpayment greater than the minimum a plus?

Yes, the monthly mortgage insurance goes down a touch with a 5% or great down payment. I believe it goes from .55% a year to .5% a year (divided into 12 monthly payments). The lender may also consider a larger down payment a plus in terms of approving folks with spotty areas in their file.

Message Edited by rmily on 01-06-2010 06:54 PM

Anonymous · ‎01-06-2010

great...good to know!

Anonymous · ‎01-06-2010

Ask, too, your loan officer/mortgage broker/real-estate agent -- whoever it is you're dealing with -- how the underwriter is likely to view the fact that your down payment is coming from an outside source. Regardless of FHA guarantee, the actual lender will be more comfortable if you have your own 'skin in the game', as they say. Also, an underwriter might question where the funds for home improvements are coming from if you can't put your own money down. Or, if you can, why you don't.