Need Mortgage Advice - Wife has 790 score, I have 560 score

[Anonymous]

Thank you in advance.  First, a little background.  We have owned our home for 10 years and have been paying an extra $500 in principal EVERY MONTH for the last 3 years.  My wife has a FICO score of 790, mine is 560 due to a couple of Charge Offs and late payments.  We are looking to downsize.  We would like to purchase a 180K home and put 40K down.  I can put another 10K down if necessary.  I am self-employed and the main income.  Do we have ANY CHANCE at all at qualifying for a mortgage ???  I have no problem paying a higher interest rate, but would just like to get approved.  We live well below our means and have a 100% payment record on our current mortgage over the last 10 years.  If a Loan Officer/Underwriter was to take a good look at our history, they would see that we always pay off a 5 year car loan in about 3 years and on and on.  It's just the stuff that I ignored while travelling all the time.  Please add any advice/feedback !!!!  THANK YOU

[Lel]

Even before the tightening of credit requirements for mortgages, it would have been very difficult to get approved with a 560 score.  Which FICO score is this?  Have you checked your other FICO scores?  And have you checked your credit reports to see if there are other negative factors that could be addressed (e.g. high credit card utilization)?

With over 20% to put down, you could consider a conventional mortgage, but with low FICO scores this may not be possible.  FHA is a possibility; you can avoid the mortgage insurance premium if you go with a 15 year loan at put down at least 10.01% for a down payment.  But FHA lenders for sub-600 scores are getting increasingly scarce.

Take a look at your credit reports.  Make sure that all the information is accurate.  Hopefully none of those lates and charge offs are recent.

[rockymtngrl]

You may also run into problems with your income being self employed. They will use the amount of income you claim on taxes after all of your deductions and then will average the past 2 years.

[Anonymous]

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@Anonymous wrote:
  ...We have owned our home for 10 years and have been paying an extra $500 in principal EVERY MONTH for the last 3 years.  My wife has a FICO score of 790, mine is 560 due to a couple of Charge Offs and late payments...We live well below our means...

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Granted, it's kind of a 'barn door closed, horse already gone' question, but it's also just the type to jump from a loan officer or underwriter's lips: how did you manage to accumulate charge-offs when you seemingly had plenty of money to pay them? Or, in other words, why didn't you spread your money around to ALL your debts?