Mortgage Loans

[KelsCredit]

Morning Fico Forum!

I am new here After searching around online and getting what seems like a thousand different estimates I found this forum so I am hoping for some personal opinions!  I don't want to waste any lenders time before I have a good idea of what I can afford.

My income: $15000 a year (low I know but I'm frugal/cheap LOL)

Debt: $0.

Down Payment: $5000

Employed: 3 years

No cosigner

Credit score: 591

The loan I'm looking at is USDA and the interest from what I've read is sitting around 4% currently.

I have no monthly debts such as credit cards, car payments or anything like that.  I do have one small loan that went into collections in 2009 and is marked as charge off on my credit.  They have offered to settle so I am debating that, they will not do a pay for delete that I've read on here, I will start a topic in rebuilding regarding this matter.  

[MovingForward_2012]

You can get approved for up to $60,000 for a home purchase max and this assumes very little debt. Do you plan to work on your scores a little more?

[MovingForward_2012]

With your downpayment of $5,000, max home price would be $65,000.

[KelsCredit]

I definitely am working on improving them.  I will be getting a secured card from both Capital One and Bank of America and keeping the utilization below 9% monthly for atleast 6 months to hopefully boost my score to 620-640 before I apply.  I also only have 2 inquiries on my report.

$65000 isn't bad, homes in my area are cheap

[MovingForward_2012]

That's good. I'm glad there are homes in your area for that price range.

Most lenders want to see 3-4 active positive trade lines on your report so getting a couple of credit cards will be good. I think the lack of credit is hurting your score more than that one collection as I have one small collection from 2009 as well as a 9.5 year old bankruptcy and my score is in the low 700's. I have a car lease, student loans, and 4 credit cards reporting. I also have a car loan that was paid off in Dec with no late payments over the 4 years I paid on that loan. So it is definitely the lack of credit that is hurting your score the most.

[JM-AM]

Just want to comment on movingfoward home value.

While some lenders will still go 4 x your income, it is slowly starting to drop down. So as she mentioned max you probably would be approved for 60-65k may be high for some Lenders.

[MovingForward_2012]

True. What I quoted is the absolute max...most likely it will be lower. As interest rates rise, the amount of home you can afford goes down and rates have started to go up. The more you put down, the more you will be able to afford. I would look for homes in the $50-$55K range and maybe pick out some homes above that that you would like to see in the event your approval amount goes up.

[DallasLoanGuy]

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JM-AM wrote:
Just want to comment on movingfoward home value.

While some lenders will still go 4 x your income, it is slowly starting to drop down. So as she mentioned max you probably would be approved for 60-65k may be high for some Lenders.

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and will vary a little based on taxes and insurance.....

[MovingForward_2012]

If you can find out how much it costs to finance a certain dollar amount in your state, you can calculate estimated principal and interest, and then tack on the property taxes on a particular home, mortgage insurance, HOA, and homeowner's insurance and then calculate DTI with your other required debts included and make sure it is below 43%. This is the back end ratio which is most important.

Out where I live it cost $25 per month for each $5,000 financed. A good realtor will be able to tell you what it is in your state. This will give you a better estimate of affordability.