Lenders use middle score?

[Wonderyears]

Am I correct that lenders use your middle score for the mortgage approval process?

My TU report is way below the others as it reflects a judgment on it. As long as it's satisified, will lenders still use my middle score?

Thanks!

[Mike_B03]

That is correct, they pull a tri-merge report which shows all three credit scores and then a summary off all accounts.

As for the judgment, you may not need to have it paid off. FHA accepts judgments if there is a payment plan in place and the monthly payments are factored into the DTI ratio.

[Wonderyears]

I have negotiated my judgment to about 60% of the cost as it is today (original plus interest, fees, etc.), if paid in full. As far as a payment plan, I thought the lender would want to see 12 months of timely payments? I'm hoping to buy a home in the next 6 months. Oh well, just gonna pay it. Wish I could get it vacated, it is really pounding my TU report.

[Mike_B03]

If it's only reporting on TU and your other two scores are higher, it won't matter anyway, they will use the middle score.

As for requiring to pay it off/have payments, it depends on the type of loan and on the lender. For FHA, I've seen that they need 6 months of payment history but I'm currently in the loan process and just made my frist payment and they are ok with it, they just wanted to see the payment agreement that I have in place.

If you can pay it off for 60%, I would go that route. Wish I could have done that but they already garnished my bank account so they have all the leverage.

[Wonderyears]

Bummer. I always wondered why mine wasn't garnished? I seen different garnishment attempts on the court's website, but they were for different client's that 1099'd me for work contracted, guess they hoped they were my employer. Can my business account not be garnished?

[Wonderyears]

Went through with it.

Wth. In complete shock.
EQ (beacon 5.0) 766
EX (FI ver 2) 779
TU (TU04) 713

Tu reflects a judgment I am satisfying in full, $6500.
It shows it unpaid, the LO just said it would need to be paid.

I am ecstatic, believe me. Just in shock. My highest was 679 last April. Most of my issues were past SOL, and finally also fell off my CR. It has been almost 9 yrs since delinquencies, and I kinda feel like a fraud.

Even so, gonna move forward and not be the drain I was in my early 20's. Guess that is the best I can do.

Prob gonna make up for it with the IRS as I will be making very minimal deductions to meet income requirements. Any idea on what it would take to qualify for $220-240k loan? Home value max 250, min of 25k down? I have no debt, CCs paid in full each month, only used to strengthen my credit. No installments.

Calculators online seem to put it around 48-50k min? Would that be enough?

Could I ask my LO that? Do they care if I adjust my taxable income accordingly?

Thanks all!

[tooleman694]

250k home, with FHA you would need like 8k down plus like another 10k for closing. Conventional with 5 percent down a bit less then 15k down plus closing.

I would be looking at only Conventional with your scores and do LPMI to keep the house payment low.

[Mike_B03]

Those are great scores! Congrats!

So no other monthly debt...no credit cards? No car loans? Student loans? Any bankruptcies within the last 4 years?

You can probably go Conventional instead of FHA but since you don't have 20% to put down, you'll still have to pay PMI. On Conventional though, the PMI is less and it can be dropped off after you reach a 78% loan-to-value ratio. With FHA, you have to pay it a minimum of 5 years, unless you refinance into a Conventional loan of course, but then you have to pay closing costs again.

The way it's figured out is you take all the mortgage assocaited monthly expenses (principle, interest, property tax, PMI payment, house insurance, HOA fee) and add it to any other monthly debts you have. Say the total is $1500...you want to be at a maximum of 43% DTI, so $1500/43*100 = $3,488/month in income or $41,860 per year.

Now they will want to see two years of tax returns, so 2011 and 2012. They will average it out over 24 months. The loan officer won't tell you exaclty what income you need to write on the application, I don't think they legally can...mine said "I can't tell you what you have to report on your taxes, but you need to make a minimum of $6,000 per month to qualify for the loan." So you take that info and do the math. 

What kind of business structure do you have? Self-prop, LLC, S-Corp? It will affect how your income is figured.

[tooleman694]

Thats why with Conventional you do LPMI, either the upfront fee or they jack up your rate a touch and no PMI for the life of the loan.

250k home LPMI fee would be like 6k at closing I bet. Way Way Way Way cheaper then FHA.

[Wonderyears]

Thanks again Mike, Tooleman!

Would love to go conventional with 20%. bt that's not gonna happen. I will look into the lump PMI payment however. With conventional, though, are there tighter restrictions on the dti ratios? Using only my income is gonna put the squeeze on my home purchase price (my wife has a Ch 7 BK less than 2 yrs ago). I like the numbers that you threw together, Mike. Very doable, but seems to easy to be true. I do have no debt...what all is included in one's dti? My school loans are paid, no CCs with balances, no auto loans or anything else financed.

I was asked for copies of my 2010 and 2011 returns, and an updated 2012 P-L statement. Mike, tell me what to expect by the structure of my business. As of now I am still a sole prop, with an LLC very near. As of now they will count whatever I pay myself and the business' profit, correct? Is there other implications depending on how I am set up?

Thanks as always!