My will I qualify post

[boomhower]

1. Credit.  I'm still waiting for my reports to update from paying off all of my debt but should be in the 680-700 range.  Only negatives are two collections from 2006.  $400 and $2700 both from apartment complexes.  No lates, judgements, BK, or charge offs.What are your credit scores and if you have any, what negatives (collections, charge-offs, late payments, BK's, judgments, tax liens, back owed child support, etc.) are on are credit and if they are owing or not.  When were the negatives, this is important, month/year is preferred, such as 3/07.  For BK's the Ch, filing & discharge date.  Even if credit isn't less than perfect, if you only have credit for a short period of time (<24 months), authorized user accounts (which aren't considered by underwriting), accounts from your father with the same exact name because you are a Jr., etc. that is important information to know too.
2. Income. ~$33.5k base but average of last two years may be slightly higher with holiday and OT but not much.  Verifyable via W2 or paystubs. Gross income is what is important when qualifying, not net income.  For self-employed/1099'd people it's your gross income minus expenses/write-offs, adding back in depreciation/depletion.  I know this is pretty sensitive for some people to list their income, but remember this board is anonymous (for those of you who want to remain that way).  If you don't want to list your income, and just want to receive advice without addressing that part of qualifying (which is very major), just say you have enough income, no one will pass judgment, but realize the advice given might not be able to be complete.
3. Source of income.   Regular pay with a bit of OT and holiday. Where is the income coming from?  Employment, pension, social security, disability, foster care, VA benefits, rental income, lottery income, etc.  If it's from employment, is it salary, hourly, overtime, bonus, commission, etc.
4. Monthly debt payments.  $270 car payment and $100 on a consumer finance loan.(bought a storage building) This goes hand in hand with income and the new mortgage payment to determine your debt to income (DTI) ratio.  Only items on credit is the general rule, but also items such as alimony, child support, union dues and some other work related expenses are included too.  Only the minimum required payment amount is what underwriters are concerned with.  Items such as utilities, cell phone, insurance, etc. are not included in the DTI.  If you have a question if something is included just ask.
5. Employment Same employer for four years. Normal full time job paid hourly. (for those who are employed).  What type of employment such as self-employed, S-corp, W-2'd, 1099'd, part-time, full time, 2nd job, etc.  How long have you been on the job & how long have you been in the industry.  A 2 year employment history is what most loan programs require.  For those who have been self-employed less than 2 years, what did you do before your venture?  For those of you who have less than 2 years employment history, did you graduate from a higher education school before you started working?
6. Assets/Reserves.  Main part of my question.  Right now essentially $0 other than $15k in a 401k. This is to determine how much you could potentially have as a down payment and also as reserves to help qualify (for example if your debt to income ratio is high this could help qualify you anyway).  Savings, checking, 401k, IRA, stocks, bonds, CD's, mutual funds, money market accounts, gift, etc. all can qualify.  If it is a pension or retirement account that does not permit you to withdraw or take a loan against (other than for hardship), and is only able to be used after you quit or retire, then it cannot be used as reserves.
7. Location. 28379, sky high tax rates, especially in the city limits.  Tax in the county $.99/100 and if it's inside the city it's another $.40/$100 totaling $1.39/$100  What state & county.  City or zip if you want but usually that is not needed.  This is to determine FHA loan limits, what special programs might be available for you, how much property taxes & homeowners insurance will likely be, amongst other items.
8. Property. Single family home.  Is it a single family house, condo, townhome, 2-4 units, 5+ units, manufactured home, a co-op, condotel, the penthouse of a 45 story apartment building, suburban, rural, a lot of acres, a working farm, a gas station, etc.  Also the condition of the property is helpful, as lenders have certain minimum requirements properties must meet (working utilities, etc.).
9. Value.  $70k-$80k For a purchase transaction, what is the home price range you are looking in, narrowed it down to, or are under contract for... and for a refinance transaction what is the appraised value of the home and when did you purchase your home.
10. Occupancy.  Primary Primary residence, vacation/2nd home, non-owner/rental property.
11. Transaction Type. Purchase  Is it a purchase, refinance just for better terms, refinance to take cash out, looking for a 2nd mortgage, a reverse mortgage, etc.

Here is the short of it.  We just finished paying off every credit card I have.  We buckled down and got it done.   Being that we just finished that our savings are $0.  What kind of bank role and I looking at for a mortage including downpayment and reserves.(looking at FHA most likely)  With my income and debt payments what kind of range could I expect?  We are hoping to be able to start shopping by the spring of next year at the latest.  Really looking to see how much we need to save up to get the ball rolling.  Yes, I know I need additional savings in an emergency fund and for other associated moving expenses but how much is the loan company going to require be in the bank.  I do have my 401k that I can tap into but really have absolutely no inention of doing so.  My provider would allow me to take $10k out of it, but again I don't intend to.  We will just save it up.  My wife will not be on the loan as her credit is trashed.

[doublespaces]

First of all, I'm no LO or an expert, I'm 26 and only know what I've learned from my own experience as I intend to close in 2 days for my house worth 225k in AZ.

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@boomhower wrote:

1. Credit.  I'm still waiting for my reports to update from paying off all of my debt but should be in the 680-700 range.  Only negatives are two collections from 2006.  $400 and $2700 both from apartment complexes.  No lates, judgements, BK, or charge offs.

First of all, carry a balance of 1% or so on ONE of your cards. Keep the rest of the credit cards paid off. The more cards they see with a running balance potentially the lower score you will have. You will receive the best score typically through carrying a very small balance on one of your cards. As long as you have a 660+ score that should be good enough score-wise to get an FHA loan. The higher the score, the less and less a lender will typically ask that you show them.

When it comes to those collections, its very well possible that they ask you to pay the collections off if you haven't prior to closing. I'd seriously spend the next few months trying to get those collections removed from your credit with a PFD or at a minimum pay them off now and request GW letters. They will likely ask you to pay it off and its just one less contingency hoop to need to deal with and looks better overall. As you are waiting to build your reserves, if you are a first time homebuyer my lender required me to provide proof of rent payments for the last 12 months and they won't accept a private person's word for it, i.e. they want bank statements showing the checks cashed or something other than "I paid him cash and can't prove it". I cannot provide this proof and am required to go in for ANOTHER review to assess risk which I'd have preferred to avoid.

1. Income. ~$33.5k base but average of last two years may be slightly higher with holiday and OT but not much.  Verifyable via W2 or paystubs.

Lets just say that you make 33k a year. That means with EVERYTHING included, you can afford just over 1300 dollars a month payment including, PMI, property tax, HOA fees, Hazzard insurance etc based on a 49% front end DTI. So remember that even if your PI (principle and interest) payment is less than that you've got all these other factors to consider and its likely more than you think.

1. Source of income.   Regular pay with a bit of OT and holiday.
   

Good here, W2 is prefferred... I am self-employed and goodness gracious...

1. Monthly debt payments.  $270 car payment and $100 on a consumer finance loan.(bought a storage building)

This cuts into your DTI and reduces the 1300 you can afford down to about 1100. Remember this is based on a 49% Front DTI which is pretty much the max anyone will be able to do, many of them are less than this and that is only if you make it through Automated Underwriting. If you go to a manual underwrite, you'll be reduced to a maximum of around 36% Front end DTI instead of 40's. They can stretch the front end ratio as long as your back end ratio is pretty much the same. If you get a 'refer' response from the AUS, then you'll be stuck with a lower possible ratio that they will accept.

1. Assets/Reserves.  Main part of my question.  Right now essentially $0 other than $15k in a 401k.

From my spreadsheet my loan officer gave me, you'll need about 7-8k to close. As long as you have enough money to close then it should go through with an ongoing and provable source of income, having reserves my understanding is only a compensating factor.

1. Location. 28379, sky high tax rates, especially in the city limits.  Tax in the county $.99/100 and if it's inside the city it's another $.40/$100 totaling $1.39/$100

Don't know that location will affect you too much, an 80k loan is within the FHA limits everywhere as far as I'm aware and the property taxes on this value of a home shouldn't put you over 36% AFAIK.

1. Value.  $70k-$80k

Based on what I have here, again just take this for a guess since I am no expert and am only going by a spread sheet that was used for my loan at a 4.25% interest rate on 30 year mortgage you could get this house for aproximately $600 a month. This is well within your DTI and the only issues I see here are the collections. Between the 7-8k required to close including the other up front paid fees etc and the 3k in collections If I were you I'd set aside at least 10-12k to get it done and have those collections paid and preferrably removed from your credit report by then. Also don't apply for any new credit and keep the inquiries on your credit report to a minimum. You will be expected to provide LOE's (letters of explanation) for just about everything on your report including those collections, any other mortgage inquriies in case you are in the process of obtaining a loan from another lender and do not leave any accounts on your credit report in dispute status otherwise they will wait till that goes away.

Hopefully i was able to help here.

[boomhower]

I'm pretty much dead set on not paying the collections.  One is valid and one isn't but I can't prove otherwise.  I'm hoping that I can find a lender that will not require them to be paid since they are relatively small and out of SOL so uncollectable.  I am shooting for $600-$700 total payment with PMI/taxes/insurance/etc.  Even if they say I can afford more that is the most I am comfortable signing up for.  If my math is right that should be about right for an 80k house.  So more or less just keep on trucking and not open anything new?  I would like to open one credit card since all I have are crap, in fact I plan on closing a few with annual fee's I am tired of paying.  I would like to have one prime card but will let it go if it will make that big of a difference.

[doublespaces]

I look at it this way. If you could settle all the collections for say 1500, that alone would give you more lending options, less headache and there are times when people would happily pay 1500 just to not have to deal with all the bs that comes with this process. I strongly suggest not aquiring ANY new credit. The new account will knock down your AAoA and the inquiry will hurt you a small amount as well as one less thing going against you. Don't close any cards as that will negatively affect your score as well. Just don't flush till your LO says you can if you get what I mean. If you shoot for the 80k range and settle those debts I think your good to go.

[doublespaces]

Also I'm curious what appears on your CR, the apartments themselves or a collection agency for the apartments? Who was the collection agency? If you decide to pay, tell them you know your out of SOL and ask for a PFD.

[Booner72]

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@doublespaces wrote:
I look at it this way. If you could settle all the collections for say 1500, that alone would give you more lending options, less headache and there are times when people would happily pay 1500 just to not have to deal with all the bs that comes with this process. I strongly suggest not aquiring ANY new credit. The new account will knock down your AAoA and the inquiry will hurt you a small amount as well as one less thing going against you. Don't close any cards as that will negatively affect your score as well. Just don't flush till your LO says you can if you get what I mean. If you shoot for the 80k range and settle those debts I think your good to go.

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Doublespaces has given you very sound advice.  I agree w/ everything said.  I would also add not to CLOSE any account either.  Don't do anything w/ your credit at all - not one single thing, until you get directions from an UW or LO who is very experienced w/ FICO scoring. 

[boomhower]

They are collection agencies, Mark, Inc. and Nation Credit Systems.  It's going to be at least six months before I even apply so I was thinking one new account and closing some of the AF accounts wouldn't be bad.  I'm just tired of paying AF's on cards I don't use.

[doublespaces]

Well, would you rather pay a couple AF's or run the risk of getting a higher interest rate on your homeloan? If they are collection companies, negotiate with them via email to get pay for deletes. Don't tell them you are applying for a mortgage or they will be more stubborn. Say, in an effort to show goodwill to them, you are willing to pay them even beyond the SOL if they reciprocate the good will with a deletion of the tradeline. Ask them for a signed letter stating deletion upon payment otherwise don't send the payment unless you are willing to settle for a smaller sum. Collection agencies are known to lie about deleting anything and the first level rep that answers the phone is rarely anyone who has that ability even if they wanted to. You'll need to speak to someone from their financial or legal depatment. Personally I got several deletions through threatening suit since they wouldn't take my disputes seriously.

[doublespaces]

By the way regarding obtaining a pay for delete, be prepared to be told no multiple times before they say yes. Check out the rebuilding credit forum.