@JMMD wrote:
Ok here is our credit snapshot:
BK discharged in Feb 2012.
Had four student loan accounts that were late from Sept 2012-March 2013. These have been paid on time since. I know these will be an issue as they were late after the BK. I do have a LOE ready to send along with the application.
Have a car loan(55 months) that is a year old and paid on time every month.
Had a secured loan that was paid on time every month and is now paid off (March 2014)
Have a visa that was secured, which is now unsecured(March 2014). Have amazon, walmart, care credit and paypal cards which are paid on time every month.
High UTI at the moment-84%.
2014 income: 103K
Haven't pulled actual FICO scores yet but last time I checked there were all 620-640.
@Anonymous aren't sure how much cash we would have for a downpayment and closing yet but potentially @ 6-7K. We will have this in March. We could either pay off the CC debt and wait a year or try for a mortgage this year. We have plenty in our 401K for reserves, especially if they require extra due to the late student loans. . Our idea is to try to find a house where the sellers are willing to pay some of our costs to offset the smaller downpayment. So what do you think our chances are?
I strongly suggest you check your FICO mortgage scores first. The mortgage scoring formula is very different from the FICO 08 score that you usually see here. The ability for us to see two of three of our mortgage scores is very new; end of Jan 2015. Go here to get them: http://www.myfico.com/Products/FICO-Score-3-Report-View/
If you know two of your scores now and then pay down your utilization it will give you a very good idea of where you stand when you decide to make application with a lender. DO NOT compare FICO 08 scores, they are not used for mortgages at all.
Also, as you know, if you bring your utilization down before you make application it will positively affect your scores. Remember ideally you want all cards to report zero except for one credit card and its balance should be 1% to 9% of that individual credit line to optimize your score. It isn't always possible to optimize your score but you will see great score improvement if your total balances are well under 30%.
Some lenders will issue a loan with a 620 mid score and some need a 640. It varies lender to lender. I have even seen 660 or a 680 mid score requirement from a few lenders, but it is rare. Some will even go to 580 but then you are going to have to pay a larger down payment and a higher rate.
For FHA you need a minimum 3.5% of the purchase price for down payment. Closing costs and pre-paid expenses are on top of the down payment and a very rough estimate, depending upon where you are in the country, is another 4%. If you don't have the cash you can negtiate a seller concession in your contract, if possible. Not all sellers are willing to pay something toward your closing costs but many are willing, you just need to get an agent that is comfortable with asking for closing costs for you (not all of them are). Another way is to get funds out of your 401k or to have the lender bump up your rate a bit to pay for some of your costs.
One of the ideas for you to think about is putting down more than the minimum 3.5% to offset the late payments after your Bk discharge. This is considered a compensating factor. You would need to discuss this with your LO, but if you put down 5% or even 10% you may be able to overcome the issue with the late payments after your Bk discharge.
