Is There Still Hope for a 5% down FHA?

[Anonymous]

Hello,

It's been a while since I posted but I just started browsing again hoping I could get some answers.  Here is my situation....

Currently working on paying off cc and other debt so my plan will be so that I'll have scores in the 720-750 range by the time I'm ready to buy.  Right now my scores are in the high 600s around 691-697. I have 1 blemish, which is a 60 day late that will disappear in March of this year. My other problem with my score is my utilization. Currently around 95% on all credit cards. Like I said, my plan is to pay off my cc and car so that when I'm ready to buy in May of 2011, the only debt I will have is my student loan, which the balance will be around $85,000. Payments of around $700/month for SLs. In my first year of grad school right now and I'm only taking out the Stafford Loans to pay for it.  My only other debt will be mortgage for my second home which is in another state and my grandmother lives in it right now.  She pays the mortgage but I know it will still be considered in my DTI. Current mortgage on that is $561/month. With that being said... I pretty sure my profile will look like this in a year and a half.

Income: $80,000

Monthly Debt: 1,300 (student loan + mortgage)

Down payment: 15,000 (5% for $300,000 mortgage)

FICOs: 720-750

By the way, I've had my first mortgage since 2001. 

My questions are...

1. Can I qualify for an FHA?

2. Will paying down my cc debt get me to those scores by next May (2011)? I plan to have all credit cards paid of this June.

3. Will FHA be the best mortgage with those scores and amount of down payment?

Thanks!

[Anonymous]

just to clarify, you are in school now, and have 80K per year income?  What is the income source?

Where is it going to be, and what are the local taxes and insurance likely to be per year?

Is your 15K counting you still having a coule payment sin reserves and paying all or some of your closing costs?  (it is getting a bit harder to get seller paid closing costs and CC alone can run 10K plus easily on 300K)

That said, DTI is going to be an issue.  How long have you been renting out the other mortgage, how much equity is in the property, do you have an official lease for each year, and can you prove the income (cancelled checks for the rent)?  If so you woul dbe able to claim the rental income (I believe 75% of it...)  But,  generally you can only run 31/43 DTI  Meaning 31% mortgage debt and 43% other debt.  Based on your 80K income figure, that would only allow about 2100 for all mortgage debt (including taxes, insurance, payment, PMI, and any HOA fees) and only about 2900 for all debt.  When you do the math, you are looking at 1600 available after current debt for a new home and you will not be able to find a house over about 200K or so at 1600 payment.

[Anonymous]

Thanks mickie08! 

To answer your questions..

I am in school right now and will not be finished until the summer of 2011. 

I work full time and have been for the last 10 years, hence the source of my income.

The location is Delaware. Local taxes are 2300/yr and insurance is around 800/yr.

I won't begin saving the 15k until Sept of this year and will have saved 15K in May. 300K is my max. I'm really looking more in the 250-260k range.

I guess I don't understand all the math involved, but according to my budget.. I'll have 2000/mth easy to contribute to my mortgage after all of my other bills are paid. The other bills being my student loan and my mortgage.   And by the way.. I don't have an official lease or cancelled checks. 

[Anonymous]

as far as the math goes, FHA guidelines dictate maximum debt to income  ratio percentages of 29% for mortgage debt and 43% for all debt (of gross income).

So if you make 80K per year that = 2066 for mortgage (80K / 12 months and then 31% of the monthly figure) and 2867 for total debt.

So you have 2 factors that are limiting.  Mortgage debt and total debt.

With your other mortgage, you are only left with about 1500 for another mortgage and still stay under the 2066 amount.  For total debt it works out to about the same as well.

So, if you were to want to buy a property, you would have to keep yout total payment  (payment, interest, taxes, insurance, PMI, and HOA if applicable) to below that 1500 in most cases. 

Assuming 200,000 loan - 30 year loan at 6% fixed (rates are likely to be up by the time you are looking at buying)  the priciple and interest would be 1199  (1200)

1200 (P&I)

200 (Taxes)

100 (PMI)

70 (Homeowners Insurance)

1570  Total payment.  You MAY be able to get a waiver for the extra 70 or so over DTI limits.  Also keep in mind that if you have any credit cards, they will count a small amount towards DTI even if there is no reported balance.  Assume 15-20 per month for each card towards DTI.

So even with a little break on the DTI, you are porbbaly looking at no more than a 200K house and also remember that there is alot of talk of dropping back to the old limits of 29% and 41% DTI.  (those were standard DTO numbers until that last couple years for FHA and some lenders still go by that)

[Anonymous]

O.K. So I guess I can be safe to say that with my husband's $35k/yr income we should be fine with the 250-300k mortgage loan. He has no debt at all. I didn't disclose it earlier because his company is talking about laying off and I didn't want to include his income. I just pray he still has the income come May of next year.  Thanks for all your help.