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Valued Member
nish129
Posts: 42
Registered: ‎04-30-2008

I'm self employed and want to buy new construction

Hi All,I am self employed and earn about 25K after deductions. I currently have a home 128K with a very high interest rate. I went stated because of income and Fico score when I first got this house. I plan to sell this house and buy new construction spring of 2010. Oh my fiance who earns  about 40K. We are planning to get a new home together. I have two credit cards with very low balances(under $100). My fiance has a few credit cards and with high balances(not sure how high). He also has a home but he is renting it now and plan to sell when I sell mine. What can we or should we do to make sure we qualify for a great amount and great rate? I know we have like 2 years but I want to make sure I'm on the right track because it was so hard and stressful to get this house. My score with TU right now is mid 600s. Thanks for any advice.
Super Contributor
ShanetheMortgageMan
Posts: 7,377
Registered: ‎09-28-2007

Re: I'm self employed and want to buy new construction

Even though it's two years ahead of schedule, there's nothing like a good plan.
 
To prepare yourself I'd work on paying down the credit cards to do two things, #1 is for a boost in the credit scores, and #2 is to reduce your debt to income ratio in order to qualify for more of a mortgage/home or to have an easier time qualifying for that part of the mortgage requirements.  Keep on using your credit cards and paying them off in full each month, this increased usage will also increase credit scores gradually.. but then when it's time to have your credit pulled, have them paid off completely for the maximum credit score increase.  If you don't have any installment loans on your credit (student loans, car loans/leases, furniture financing, personal loan, etc.) I'd obtain a small one or two for something you'd pay off in 12 months or so, as diversity on the credit reports helps obtain a healthy score too.
 
Plan on using some of the sales proceeds on your house and his home as a down payment on the new home.  3% is currently the minimum with most loan programs but I'd be prepared for possibly more as mortgage guidelines are getting more restrictive as of late.  Also recommend to have at least two months of your proposed payment remaining in your financial reserves in order to have an easier time qualifying.
 
Also if you need you, and can, take less deductions on your taxes for the next couple years to increase the amount you can qualify for.  If you need to would be determined by your debt to income ratio.  You'll need to go over what price range you are thinking of buying in, how much of a down payment there will be, and what your minimum monthly payments on debt will be at that time.
Valued Member
nish129
Posts: 42
Registered: ‎04-30-2008

Re: I'm self employed and want to buy new construction

[ Edited ]
I have two questions. Should I pay all my credit cards down to zero each month or leave a small balance?I'm financing my fiance wedding band does that count as other credit? Thanks so much


Message Edited by nish129 on 05-04-2008 05:36 PM

Message Edited by nish129 on 05-04-2008 05:47 PM
Super Contributor
ShanetheMortgageMan
Posts: 7,377
Registered: ‎09-28-2007

Re: I'm self employed and want to buy new construction

For long term score improvement, leave a small balance on the credit cards each month, but right before it comes time to apply, pay them down to $0.

The financing of your fiance's wedding band would count as traditional credit if it reports to the credit bureuas, but if it doesn't report to the credit bureaus, and as long as you can get a verified payment history (which shouldn't be a problem) then it could be considered as non-traditional credit.

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