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New Member
Posts: 3
Registered: ‎01-17-2012
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Help! What to expect when seeking a mortgage loan in a few months.

[ Edited ]

Hello fellow Ficonians!


My fiance and I are looking to purchase our first home in the next few months and I would like to get a better idea of what to expend during the preapproval process. I've outlined our current situation using Shanethemortgageman's post and would appreciate any information that would help us be better prepared in how lenders will qualify us.

 

  1. Credit.  The only score I currently know is the MyFico experience score, which is hovering around 640. My fiance's scores are around 710. Her credit history is flawless, with no late payments/collections, etc. She has gone credit card crazy the past few months while transitioning to a new job, which is why her score isn't higher.  I, however, have had some bad history regarding credit, including an auto reposession that occured almost 7 years ago. Most of my other negative marks happened around 7 years ago, which some have either already been removed from my reports, or will soon to be removed (thank god!). The only negative mark in the past 12 months happened just a couple months ago, when I student loan had me at 90 days past due, which I am currently disputing due to the autopay system not deducting my payments and no alerts to mention my past due amounts. Oh well.
  2. Credit Card Debt. As of last month, I have zero balances on my credit cards. My fiance still has used more than 70% of her limit, but we will make sure to pay down close to zero by the time we go through the pre-approval process.
  3. Income.  I currently gross $5000 month, while hers is $2500 from full-time work. 
  4. Source of income.  Even though I'm self-employed, I have a long-term client whom I have worked for the past 2 years working almost full time hours. I also have other side projects to make extra income.
  5. Monthly debt payments.  Between the 2 of us, we make a gross of about $7500/month. A little less than $2000/month goes to monthly debt (auto payments, rent, school loans). Is there anything else I should be factoring in?
  6. Employment. I am self-employed/1099'd for the past 2 years. 1st year I made $35k in first 8 months as 1099, 2nd year was slower at around 45k for the entire year. This year, my rates are higher and expect to make around 70k this year. Before becoming self-employed, I worked for agency in a Microsoft position for a full year. Grossed about 65k. My fiance has worked as a restaurant server for a few years and made decent money...around 35k a year. This year, she has found a full-time entry-level position in her field only making 2k/month, but also in the process of getting her doctorate; already has a master's degree.
  7. Assets/Reserves.  We currently have about 12k in the bank, reserved for a down payment. We've laid out a budget for this year, and expect to add 10k towards our down payment by the time we're ready to buy. We plan on having about 20-22k in savings for our down payment. Unfortunately, not enough for a conventional loan for the value of a home we are hoping for.
  8. LocationClark County, Washington state.
  9. Property.  Looking for a single home. I should note that our taste in homes are for those with older charm than the cookie cutter homes that seem to pop up everywhere. I'm aware that some lenders and loans have certain requirements on homes, so any info relating to purchasing slightly older homes (circa 1960s) will be much appreciated.
  10. Value.  Hoping for a loan for reasonable terms in the 220k-250k range.
  11. OccupancyPrimary residence.
  12. Transaction TypeFirst-home purchase.

I know this is lengthly, but I suppose the more information the better in understanding of our situation. We hope to get more insight on what to expect and how to put ourselves in a better situation before buying our first home.

 

Thanks! Hoping 2012 is fun and financially rewarding to all Ficonians on here!


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Valued Contributor
Posts: 1,863
Registered: ‎09-20-2011
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Re: Help! What to expect when seeking a mortgage loan in a few months.


kisscharlie wrote:

Hello fellow Ficonians!


My fiance and I are looking to purchase our first home in the next few months and I would like to get a better idea of what to expend during the preapproval process. I've outlined our current situation using Shanethemortgageman's post and would appreciate any information that would help us be better prepared in how lenders will qualify us.

 

  1. Credit.  The only score I currently know is the MyFico experience score, which is hovering around 640. My fiance's scores are around 710. Her credit history is flawless, with no late payments/collections, etc. She has gone credit card crazy the past few months while transitioning to a new job, which is why her score isn't higher.  I, however, have had some bad history regarding credit, including an auto reposession that occured almost 7 years ago. Most of my other negative marks happened around 7 years ago, which some have either already been removed from my reports, or will soon to be removed (thank god!). The only negative mark in the past 12 months happened just a couple months ago, when I student loan had me at 90 days past due, which I am currently disputing due to the autopay system not deducting my payments and no alerts to mention my past due amounts. Oh well. They will go by the lower score.  620-640 is the cutoff for most places with FHA which sounds like what are going to be doing.  You have got to get that 90 day late gone.  A 90 late late within 12 months of applying will stop your loan in it's tracks.  It will also boost your score greatly, it's killing you right now.
  2. Credit Card Debt. As of last month, I have zero balances on my credit cards. My fiance still has used more than 70% of her limit, but we will make sure to pay down close to zero by the time we go through the pre-approval process. That's great, zero CC debt is what they like to see.
  3. Income.  I currently gross $5000 month, while hers is $2500 from full-time work. 
  4. Source of income.  Even though I'm self-employed, I have a long-term client whom I have worked for the past 2 years working almost full time hours. I also have other side projects to make extra income.
  5. Monthly debt payments.  Between the 2 of us, we make a gross of about $7500/month. A little less than $2000/month goes to monthly debt (auto payments, rent, school loans). Is there anything else I should be factoring in? That's it, just debts you owe, but you don't count rent in DTI.
  6. Employment. I am self-employed/1099'd for the past 2 years. 1st year I made $35k in first 8 months as 1099, 2nd year was slower at around 45k for the entire year. This year, my rates are higher and expect to make around 70k this year. Before becoming self-employed, I worked for agency in a Microsoft position for a full year. Grossed about 65k. My fiance has worked as a restaurant server for a few years and made decent money...around 35k a year. This year, she has found a full-time entry-level position in her field only making 2k/month, but also in the process of getting her doctorate; already has a master's degree. They will use the last two years of tax returns for you.  What was her employment situation before?  They usually like to see two years at the same place/field but exceptions can be made if she recently got out of school and is working in that field.
  7. Assets/Reserves.  We currently have about 12k in the bank, reserved for a down payment. We've laid out a budget for this year, and expect to add 10k towards our down payment by the time we're ready to buy. We plan on having about 20-22k in savings for our down payment. Unfortunately, not enough for a conventional loan for the value of a home we are hoping for. Should be fine.
  8. LocationClark County, Washington state.
  9. Property.  Looking for a single home. I should note that our taste in homes are for those with older charm than the cookie cutter homes that seem to pop up everywhere. I'm aware that some lenders and loans have certain requirements on homes, so any info relating to purchasing slightly older homes (circa 1960s) will be much appreciated. Age usually isn't an issue as long as it passes inspection.  The cutouff usually applies to price for certain loan products, yours is fine.
  10. Value.  Hoping for a loan for reasonable terms in the 220k-250k range.
  11. OccupancyPrimary residence.
  12. Transaction TypeFirst-home purchase.

I know this is lengthly, but I suppose the more information the better in understanding of our situation. We hope to get more insight on what to expect and how to put ourselves in a better situation before buying our first home.

 

Thanks! Hoping 2012 is fun and financially rewarding to all Ficonians on here!


Good luck!

Contributor
Posts: 84
Registered: ‎02-26-2012
0

Re: Help! What to expect when seeking a mortgage loan in a few months.

Sounds like you are right on track. I would look into a mortgage banker in ur area and have him start the pre approval for you. That way if there is anything you need to do, like get deletion letters.. You can be working on that while you are saving. Good luck!
Super Contributor
Posts: 8,356
Registered: ‎09-28-2007
0

Re: Help! What to expect when seeking a mortgage loan in a few months.

Hi Charlie (I assume),

 

I am not sure what the myFICO experience score is, I searched for the term but couldn't find anything.  I recommend you get both of your Equifax & TransUnion scores in order to have a good idea where your mortgage FICO scores are.  The Equifax score should be identical to what a mortgage lender pulls, the TransUnion score will be different because myFICO has Classic 98 TU scoring whereas mortgage lenders use Classic 04 TU scoring (different version).  I found this makes people with a low 98 score have an even lower 04 score, but people with a high 98 score tend to have a higher 04 score.  660 is around where both should be even.

 

The qualifying income for you (since you are self-employed) will be after expenses, line 31 on Schedule C (http://www.irs.gov/pub/irs-pdf/f1040sc.pdf) + adding back in line 12/13 if there is anything there.  2 year average of that figure, so that'd be your 2009/2010 or 2010/2011 if you've filed your 2011's (which from the information on your business only being 2 years old you'd want to otherwise it sounds like you wouldn't have much qualifying income).  If that comes out to $60k/year then that would be $5k/mo.

 

It sounds like your fiance's income from her new position should be OK to qualify.  You mentioned $2.5k/mo & $2k/mo, I assume $2k is the net figure.

 

The payments included in the debt ratio would not include rent, so it'd just be the auto payment & student loans.

 

If you just have $1k/mo in payments and $7,500/mo gross income then a $250k sales price with FHA financing shouldn't be a problem.... even at $6k/mo of income it should work out.  The auto repo, if reporting a balance of $1k+, would need to be paid for FHA financing (so you may want to wait until that falls off at the 7 year mark), but you should certainly work on the student loan late payment as even though it is solated, within 12 months doesn't look good with just mediocre scores.

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