Mortgage Loans

[jcmaroon]

My wife and I are hoping to purchase a home this summer. We are looking in the $350,000 to $400,000 range.

Situation is this:

We'll both probably have credit scores in the 720-730 range by then. We're both in the high 600s right now, mostly due to high utilization ratio that I'm taking care of as much as I can.

My student loan payments are high - $1,600 a month - but our DTI ratio will be quite healthy because our household income is $205,000 or so. Only one car payment right now, which helps.

I'm wanting to get a mortgage with just 3.5 percent down - FHA obviously.

Thoughts and experiences? I guess I'm trying to figure out, among other things, when to stop paying money into lowering my credit utilization and start saving for the down payment instead. At what point will our credit scores be good enough to qualify? Is there a magic number?

[tooleman694]

Magic score is a 640 with FHA, 680 with Conventional.

With your scores, I would go Conventional to save on PMI.

[jcmaroon]

I thought you have to have 20 percent for a conventional?

I didn't realize that your FICO could be that low. I've read all this stuff out there about people with 740s being turned down.

[tooleman694]

LOL where are you reading that!!  You have come to the right place.

FHA is 3.5 percent down, Conventional is 3 percent down.

FHA you will pay a high PMI payment every month, Conventional you can get around it. So its the way to go if you have the score.

[Cadillac-XTS]

I thought for conventional to avoid pmi you needed atleast 10% down. Am I wrong?

[tooleman694]

All you gotta do is LPMI, you can pay the upfront fee or you can have them up your rate a little.

[Cadillac-XTS]

Oh ok. Thanks for the info

[jadeite788]

I was told by my credit union by the mortgage department that FHA is 640 for score with a 3.5% downpayment with interest of 3.75 and a conventional is 680 credit score with 5% down payment with interest that will vary. 

[jcmaroon]

Is the process pretty predictable? In other words, with, say, 5 percent down, a good DTI ratio, and a 725-730 should we be pretty confident in approval for $350,000-$400,000?

[tooleman694]

All banks have different guidelines they follow. Some might want 5 percent, some have different debt ratios, and so on.

Its part of Fannie Mae’s standard eligibility requirements.