My DH and I have a contract on a home, the purchase price is $128,000. We have $22,000 to use at closing to cover closing costs and down payment, we've already put down $3000 in earnest money to the attorney (this is a FSBO).
We've been working with a LO and when we went for the appointment to apply he began with "637, I can't do a 637." Originally he pre-qualified us for an FHA loan for $140,000 with the same info, so this was a shock to hear that because we were happy we'd found a house well below what we had been pre-qualified for. Then he decided he could do a 637, and only ran the info with a conventional mortgage. He didn't even mention FHA. So the rate he offered was 4.85%, and payments would be about $1026 per month with PMI. Then he didn't have my debts on the application and had to redo it and after redoing it he couldn't get our ratios in the right range. We had to reschedule our appointment because his computer stopped working (I know this sounds crazy). So, my BIL referred me to a mortgage broker and I spoke with her today and explained our situation. She gave me three options, I'm looking for advice on if I should just go back to original guy or work with the broker.
Here's some info about us:
Wage earners, my annual gross is $40,000 and his is about $18,500. Combined wages $58,500
He also has interest income of about $20,000 per year. The only issue with this is that it comes from mortgage interest, not from a bank. His father provides mortgages for people who cannot qualify for a traditional mortgage, the income is split between my DH, his father, and his brother. He has had this income since we've been together and it is reported on his tax returns as taxable income. As the money comes in his father deposits it into a mutual fund account. The only records of the income are the deposits into the mutual fund account and the tax returns. Is that enough information to use as additional income on a loan? We only mentioned it to the LO but did include with the application.
My monthly debts are split between credit cards ($315), car payment ($289), and student loans (which are currently deferred, but only until next June, about $450-500 per month I think, I'm not even sure). He only has 1 credit card with a small balance, min. payment $35.
So, as I was saying, the mortgage broker gave me three options, and I'm trying to decide which is the best and looking for advice.
1. Conventional mortgage. Apply for the mortgage in DH's name only. His credit score is in the mid 700's and much better than mine. The only way we can do this though is if his interest income is counted. She said she would need to see past two years tax returns (no problem), and that he would need to write a letter explaining where the income comes from for the underwriter.
2. Conventional mortgage, but I would have to pay down some of my debt to do a rapid re-score. She said if I pay down about $4000 I can get my score up to 690 with a rapid rescore. We would apply together for a conventional mortgage.
3. FHA. She said that they need 640 minimum scores for FHA so I can pay down some debt to get my scores to 640 and the apply for FHA.
So, what should I do? Should I go with the broker and choose one of these options, or should I go back to the LO and ask if he can add in DH's interest income to make our ratios better?
