Is this right?

[Mellochick]

I have been working with a lender and I want to make sure she is telling me the correct information. I am trying to get an FHA 203k loan. The home is valued at $152,000 according to the tax documents, they have it listed currently for $85,000 but the REO website shows it as $70,000 so we are hoping the realtor drops the price soon. We are going to try to get it for $50,000 and then add $10,000 worth of minor repairs and upgrades. Since my score is low, she states that we will need 10% down which will be gifted from a family member. She states that I need 6 months worth of reserves to season for 2 months. I get needing reserves but that much really? My credit score is around 550 and I have been making some real progress on increasing it. I currently have a car loan myself, a car loan with my exhusband that I am no longer obligated for per the divorce decree, and also some student loans which are in deferrment. On my credit, I have a few things outstanding. An old student loan that was not consolidated which I can make payments for, a very few small utilities that are old and past the SOL now but may not get taken off, and a judgement that I intend to pay before closing. She states that I can have up to $2000 in collections before we have to start adding 5% DTI per item. I can include the one student loan as 5% and then the other smaller items all fall in the $2000 allowable. Now, she has made me send over last 3 years tax returns, work history with contact information, child support documentation showing that I receive it monthly, recent check stubs, bank statements, school documentation showing that I am attending full time. Is it normal to have to document and provide all of this? Just want to make sure that I am not getting screwed over.

[meehan22]

With a low credit score you'll have to pay for it in other ways. 6 months of reserves when owning a home is pretty smart to have in the first place when purchasing. I dont see it at all that you are being screwed over. 

Also for a heads up be careful with that car loan with your ex husband. Even though the divorce decree says your no longer responsible depending on the area you live in it can still bite you in the rear end if it was funded while married and your name is still on the loan and hasn't been refi'd off. Where I live its all joint property at the time of marriage even if the divorce papers say otherwise, I've sued and got judgments on many spouses after a divorce and the decree saying otherwise. You may want to check with your state laws and if its possible to bite you in the rear to get it refi'd quick and your name off of it if possible. 

[Mellochick]

 I am in Ohio. He is actually wanting to refinance it himself because the payment is so high. I read somewhere online that if you cosign for a car loan, if the other party has made on time payments for at least 12 months, that it cannot be counted in the DTI for the FHA loan. Anyone else heard of that being true?

[EtereoX]

Hey Mellochick, 

   I'm also in Ohio and have been looking for someone who is willing to work with a sub-600 credit score to get a mortgage. Any chance you would be willing to PM me who you are working with? Also looking at houses in the $50K range.

Thanks a lot!

[StartingOver10]

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@Mellochick wrote:

 I am in Ohio. He is actually wanting to refinance it himself because the payment is so high. I read somewhere online that if you cosign for a car loan, if the other party has made on time payments for at least 12 months, that it cannot be counted in the DTI for the FHA loan. Anyone else heard of that being true?

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You would need to prove to the lender that your ex-husband is making the payments on time and out of his own account by providing a copy of the cancelled check for each payment for the past 12 months or showing his bank statements for the past 12 months where the tradeline is being paid out of his bank account.

It would be much, much better for you to have your ex refinance it into his name so you don't have to go through all of that - plus if he defaults on the loan and you are joint on it the divorce decree only allows you to collect against your ex. The lender can still come after you. It is far better to get him to refi now while he wants to do so. Better for you.

[StartingOver10]

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@Mellochick wrote:

I have been working with a lender and I want to make sure she is telling me the correct information. I am trying to get an FHA 203k loan. The home is valued at $152,000 according to the tax documents, they have it listed currently for $85,000 but the REO website shows it as $70,000 so we are hoping the realtor drops the price soon. We are going to try to get it for $50,000 and then add $10,000 worth of minor repairs and upgrades. Since my score is low, she states that we will need 10% down which will be gifted from a family member. She states that I need 6 months worth of reserves to season for 2 months. I get needing reserves but that much really? My credit score is around 550 and I have been making some real progress on increasing it. I currently have a car loan myself, a car loan with my exhusband that I am no longer obligated for per the divorce decree, and also some student loans which are in deferrment. On my credit, I have a few things outstanding. An old student loan that was not consolidated which I can make payments for, a very few small utilities that are old and past the SOL now but may not get taken off, and a judgement that I intend to pay before closing. She states that I can have up to $2000 in collections before we have to start adding 5% DTI per item. I can include the one student loan as 5% and then the other smaller items all fall in the $2000 allowable. Now, she has made me send over last 3 years tax returns, work history with contact information, child support documentation showing that I receive it monthly, recent check stubs, bank statements, school documentation showing that I am attending full time. Is it normal to have to document and provide all of this? Just want to make sure that I am not getting screwed over.

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^^^Documenting everything for an FHA loan is normal.