Mortgage Pre-approval Question

[guykara]

Hi All,

The new home community I'm looking to purchase in requires around 5-6 months for building time. They also require a pre-approval letter and $1,000 to secure a lot.

I'm looking to close / move in December. I would like to find out the best time to seek a pre-approval letter. I wanted to wait till September to apply to take some time to build up my savings / pay off my cc quite a bit, but would like to know if it's possible to get the pre-approval letter anyways, and then worry about rates & such once my credit score / credit report / assets looks a bit better. Here's some info about my current situation:

Combined income with my gf and I: $120,000

Combined debt paid per month: $980

My middle credit score: 627 (I'm expecting this to go up quite a bit, got confirmation last friday about 3 baddies being removed)

Her middle credit score: High 700's, low 800's

My Credit Card Info: $~6000/~13,000 (I wanted to pay this way down before I applied)

Her Credit Card Info: $0/20,000

Savings: ~$2000

Loan Amount: $250,000

My work history: Current job - started in 1/2014-current. Left a job that I was at from 4/2013 - 12/2013. (Left because of more money / better opportunity). Before that I was self employed (have the tax records to prove that) for about 6 months, and before that I was employed full time for another company for ~2 years. All the same career path. I still do freelance / contract work on the side

Her work history: At her current job since 1/2013, before that she was getting her masters for a year for a 100% related career field.

* After the 3 baddies are removed that are mentioned above, the only bad items I'll have on my credit report are 2 CO's from 2008 that have been PIF for ~4 years. I also have a judgement from 2009 from a simple contract dispute for services that is reporting as pending, but was satisfied over 4 years ago. Working with an attorney now to get this properly reporting, hopefully will be resolved within a month. I haven't missed a payment or have any negative items on credit report for over 4 years.

I would appreciate anyones advice.

Thanks!

[TimeToRecover]

Well I can't talk on you numbers but I will tell you what I am experiencing.  I am currently deciding between a new build vs a resale.  I ahve gone back to the builders twice now each time asking more questions.  I am going to go with my realtor again next weekend to look at resales and I find I really don't think I will find waht I want in resale I plan to start my process with the builder the next weekend (asuming the lot I want is still available).  The reason is to have the home ready for move in by late november early december.  My lease expires the end of December.  So timing I actually stared my loan stuff 3 weeks ago.  the mortgage banker I am working with will do full approval thru underwritting without an address for the property and basicaly you get your full approval and the only contingencies are those for the property.  I jsut finished that process and there were 3 contengencies that were mine (2 already satisfied 3rd I sent for the paperwork they wanted on friday).  All the other contengencies will be for after I put in a contract.  

So I can now shop knowing I am already approved which would give the seller confidence in my offer as it is equal to a cash off as there are no financing contengencies and it gives me confidence in that I know I am approved already.  Now once this is tied to an address if something falls thru for other reasons (ie seller bacs out, inspection fails etc) I would ahve to be approved again but they said once thru underwritting once it is quicker the 2nd time.  

But I digressed.  I also was going to wait until I finished paying down some of my utilization I was just taking everything in to get feedback on if there was anything should do to improve my loan chances (I was concerned because I have a foreclosure that is 4 years old)  The LO convinced me to go ahead and let her pull my credit etc.  I was off by a few percent on my dti I thought I was around 45 I was at 43.  but she said not to worry about it since even if resale i would have an august at the earliest  closing (thats when my cd matures for my down payment) and they will repull credit and my new utilization would show at that time.  She also said that they can always do a rapid rescore right up until closing.

So after the long story I would say I would start a relationship with a lender now as they can start the process and give you an idea where you really stand.

[ShanetheMortgageMan]

Since your negatives are all from many years ago, your credit should be able to qualify now.  You mentioned the build time is 5-6 months, so your credit scores will be re-checked once after your credit is checked for the initial pre-approval.  So if your scores go up, you'll be able to use those higher scores later in the process to get better interest rates.  With your timeframe, you could get pre-approved in June and then be closing in December, with your credit being re-checked around October.  You don't need to have all of the down payment saved up at the pre-approval, you just need to have it prior to closing and be able to source where it came from (i.e. your own paychecks, gift from family, selling an automobile, etc.).

Regarding your employment history, you will need to document the prior 2 years, including the self-employment.  Most likely will just need to write a letter of explanation and provide some evidence that your company existed (business license, letters from vendors/clients that you worked with, etc.).  Her employment should be fine as she's working in a career related to her studies.

Getting the judgment to report correctly isn't a requirement as long as you have a copy of the satisfaction/release.

[guykara]

Thanks for responding, Shane.

The plaintiff in the case never reported the satisfaction, but I do have the proof it was paid as well as the proof that the woman deposited the check (my bank keeps images of this). I also have proof of trying to contact this person without any response. This is why I'm getting an attorney to help at this point.

[guykara]

Also, not sure if this matters, but I don't plan on providing a down payment - I'm looking at 100% financing options that my bank, NFCU offers. I'm working with a financial advisor there to keep my family on track for proper savings / card payoff. Just to make things a bit easier with the pre-approval process, I'm going to wait till June for the 3 baddies mentioned above to fall off.

Thanks!

[ShanetheMortgageMan]

NFCU is very tough on credit, from what I've seen & heard they want good to excellent credit scores, especially for their 100% financing program.  I'd make it a goal to get at least a 680 score before applying with them.

Regarding the judgment situation you explained more details on, yes unless there is a satisfaction/release that has been filed, you'll definitely want to get it reported as no longer owing on the credit report otherwise an underwriter won't just accept your check + the proof the debtor deposited it.  Have you tried getting in touch with the plaintiff's attorney?  Or was there no attorney involved for the plaintiff?

[guykara]

At the time, the woman was working with an attorney, yes. That's an excellent point, getting in touch with him might be easier, since his client isn't responding.

Responding to the credit issue - do you know of any other banks that offer 100% financing that are a bit better on credit requirements? I don't think having at least a 680 credit score will be an issue by the time I'll be applying.

[ShanetheMortgageMan]

Perhaps the plaintiff has passed away?  I usually start with the plaintiff's attorney on judgments, since that is who the plaintiff is paying to deal with the situation anyway.

http://www.bbt.com/bbtdotcom/lending/mortgage/mortgage-loan-options/first-time-homebuyer-and-low-dow... may be of interest, appears it only goes to 97% financing instead of 100% financing now though.

[guykara]

Also, can I apply for an FHA loan just to get the pre-approval letter, and then once I have more assets / credit, can I go back and change my loan type? The reason I would do this is to get my pre approval letter to move forward with the building process.

Thanks!

[ShanetheMortgageMan]

Sure, but realize you would only be pre-approved for an FHA loan.  Getting pre-approved for FHA doesn't pre-approve you for another type of loan, you have to start the whole pre-approval process over again if you want to switch.