First Time Home Buyer in California I'm a bit overwhelmed

[Anonymous]

Hi everyone, 

This fico forum has helped me so much in rebuilding my credit that i thought maybe I should ask for some advice on purchasing a home.

 My mother and I are looking to purchase a home together. 

We would be first time buyers but dont know where to start, should we look for homes, get a real estate agent, apply for a loan, and what loan would we apply for?. We have about 3000 saved and if needed my mom can take some money out of her 401K for a bigger down payment. 

Does anyone have any advise or know of any good real estate brokers in the Los Angeles/San Bernardino area that can help us out?

me

32,000 yearly income

Transunion credit score of 629//Equifax 736//and for some reason i cant get my Experian Score

Capital One Credit Card 500 limit

Curacao Credit Limit -450

Mom

45000 yearly income

Transunion credit score of 673

2 car loans (but my sister pays for one out of her checking account, i think I read somewhere that if we prove this it will not count against our chances)

Department Store Credit Card 1200 limit

Any advice would be greatly appreciated.

Thank you 

[ShanetheMortgageMan]

You should probably start out by speaking with a loan officer to figure out how much you could get approved for.  That way you will know your price range and what areas you could buy a home in that would accommodate what you and your mother would need. 

Los Angeles and San Bernardino County are two of the largest in the U.S., so you might want to be a little more specific in terms of your location, as real estate agents usually work in a general area... like for example the South Bay, or the San Gabriel Valley, or north Riverside County, etc.  Would you be looking in the Ontario/Pomona area?  That is right on the boarder of the two counties you mentioned.

If the sister is also on your mom's car loan that she pays on, then it can be excluded from the debt to income ratio... but if she's not on the loan then it'll count against what you can qualify for no matter if she's paying for it or not.  What are the payments on the two car loans and are there any minimum required payments on the credit cards?  How long ago were the auto loans and all the credit cards opened?

If you can come up with the down payment from your own funds that is usually best, but here in California there is CalHFA's CHDAP down payment assistance program that can help out with the down payment as well.  It's a good program, but it adds time to how long the overall process takes and a lot of sellers here aren't very patient.  So using it may make your offer less attractive to sellers.  http://www.calhfa.ca.gov/homebuyer/programs/index.htm has details.  Using funds from the 401k is fine to do though, but I'd recommend taking a loan against the 401k rather than a withdraw so she doesn't get hit with penalties & taxes.  FHA just requires a 3.5% down payment, and conventional requires 5% down.

What does it say when you try to get your Experian credit score?  What are the negatives on your credit and when did they occur?  Are they only on TransUnion and not Equifax?  What are your mom's negatives on credit and when did they occur?

Are you and your mom living together now?  How much do you pay for in rent?

[Anonymous]

Hi Shane, Thanks for the quick response.

There's 6 in our household. We currently rent a 4 bedroom home in West Covina. Current monthly payment is 1800. We are open to looking else where for a home (ontario, Chino, Fontana).

My sister is not on the car loan, both are under my mother's name and she owes about 49,000 in total for both. One payment is 450 ( car purchased 12/2012) and the other is about 600 (this one was just opened on 10/2013)

Curacao was opened May 2014-37.00 min payment

Capital One was opened June 2014-25.00 min payment (using this one to rebuild credit)

Department Store CC was opened about 6 years ago, 25.00 minimum payment.

When I try to get my experian score it tells me there is not enough information to generate a score.  I have one charged off account that is set to fall off this November and yest it only shows up on Transunion and Equifax.  My mom has 2 medical bills in collections, they have already been paid off, just waiting for the agency to report to the credit beaurus, one of them is going to get completely deleted because it was sent in error. 

Hopefully this gives more insight.

[ShanetheMortgageMan]

Yes the additional information certainly helps. 

Sounds like the reason for no score on Experian is because you have pretty short credit history - 2 months on one account and 3 on the other account.  You can read at http://www.myfico.com/crediteducation/questions/requirement-for-fico-score.aspx it says:

There's really not much to it; in order for a FICO® score to be calculated, a credit report must contain these minimum requirements:

• At least one account that has been open for six months or more
• At least one undisputed account that has been reported to the credit bureau with in the past six months
• No indication of deceased on the credit report (Please note: if you share an account with another person this may affect you if the other account holder is reported deceased).

So it sounds like about November you should have both cards reporting 6 months of history, and you should get a score, plus you said the charge-off would drop off.  Looks like November should be a good month for Andviola's credit.  You may want to open up a couple additional credit cards, as then they'll be at least 3 monts old by then.  Not sure if you did the HIPAA program, but if you did then both of your mom's medical collections should be falling off if the process was followed.  More info can be found at http://www.whychat.5u.com/GUIDE%20HIPAA%20PROGRAM.html

About a $250k sales price would give you a monthly payment of what you are paying now.  About a $325k sales price would be about your upper limit, payment would be around $2,300/mo... not sure if you find that affordable though.  To find out, try putting away an additional $500/mo for the next few months and see if finances get too tight or not.  Worst case is you'll have an extra $1,500 saved up.

[Anonymous]

Thanks for the inssight Shane. The houses we are looking at in the areas previously mentioned run at 385,000 and up. We need a 5 bedroom home, do you think this is doable with our income and credit history?

We are prepared to pay 2500-2700 monthly  on a mortgage. 

[ShanetheMortgageMan]

For a $385k sales price you'd need to put down about $38.5k in order to get your debt ratio to qualify.  FHA maxes out at 56.99% - no exceptions, and with just 3.5% down the debt ratio for you two would be 59.6%.  Putting down $38.5k (10%) would drop the debt ratio to 56.8%.

Can your sister buy the car from your mom?  That way it'd eliminate it from the debt ratio and you could purchase a $385k home with 3.5% down and the debt ratio would be about 52.7%.

Conventional is another option you may have, but the debt ratio would cap out at 45%, so it'd really reduce the amount you could qualify for.

The good news is that for the price point you are looking for, the total monthly PITI payment will be within the range you listed.