Pre approval hit a wall :(

[Anonymous]

So I finally went for it and had our lender pull credit. Everything was fine EXCEPT, my husband has some old private student loans in collections that will count against me. I was applying on my own because we knew his scores were low. We also live in Texas, which is community property state, so..... His collections accounts are killing us. We were applying for FHA 334k and we don't qualify now that she has to take 5% of his collections and add it to my DTI. 😔

We have tried everything with Navient to get them out of collections in the past. We can't afford to pay it off, as it is close to 30k. 

Any advice? Support maybe?

FYI, LO says without those collections accounts, we qualify for 350k.  It's a DTI problem. 😔

[Anonymous]

Do you have any other monthly payments on your credit that you could wipe out? What income amount are they basing this off of?

[StartingOver10]

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@Anonymous wrote:

So I finally went for it and had our lender pull credit. Everything was fine EXCEPT, my husband has some old private student loans in collections that will count against me. I was applying on my own because we knew his scores were low. We also live in Texas, which is community property state, so..... His collections accounts are killing us. We were applying for FHA 334k and we don't qualify now that she has to take 5% of his collections and add it to my DTI. 😔

We have tried everything with Navient to get them out of collections in the past. We can't afford to pay it off, as it is close to 30k. 

Any advice? Support maybe?

FYI, LO says without those collections accounts, we qualify for 350k.  It's a DTI problem. 😔

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So, did you know that different lenders allow different maximum DTI ratios?  

What is your total DTI with your husband's collections?

For example if you go to one of the big box banks their FHA total debt ratio that the borrower can carry is considerably lower than if you go to a non-bank type lender that only issues mortgages. The difference is huge....I have seen differences in the 6% range - and I suspect if you go with Wells Fargo or one of the other well known big box banks, the differences might even be larger than that.

Who was your lender (the institution, not the LO)?

Also, did you know if you have other compensating factors a good LO might be able to work with a little higher DTI?

[Anonymous]

We are using lone star financing in Texas, not one of the big banks. 

My monthly debts are $877 + 2117 (husbands)= $2,994

We are only using my income of 85k W2, not including bonus. 

LO says we currently would only qualify for maybe $170k, which is not enough for our area. 

[StartingOver10]

Find out what their max total debt ratio is for their criteria on FHA loans.  FHA will allow up to 56.99% but many lenders cap their max back end ratio to 50% to 55%

Find out what compensating factors you need to overcome a high back end debt.  You already have one - additional income from a HH family member that isn't on the loan. You may have other factors that you need to discuss with the LO.  

As pointed out by the other poster above my first post - what other debt do you have that you can remove/pay off to reduce your total debt ratio assuming you don't have an extra $30k sitting in your bank account to pay off your husband's student loans. Taking $877 off monthly will help - or even a large part of it. What makes up that $877/month?

How big of a mortgage are you looking to get?  

One other thing:  have you looked at the student loan forum here on MyFICO to see if there is a way for your husband to rehab his loans?  NOT Consolidate - rehab. After 9 months of payments on a rehab the late pays go away and only good payments show. Go to the subforum for details.

[Anonymous]

If you paid off your accounts with the $877 min payments did they tell you what you would qualify for at that point?

[Anonymous]

Thanks. I'll check with our LO after the holiday to see what their max DTI is. 

$877 is my total monthly payments, to get rid of that, I'd have to pay off $35000 worth of student loans, a car and credit card. 😔 Sounds like our best bet is to try and negotiate a settlement with my husbands CA.  We can't afford to pay $30k worth of debt right now, then we wouldn't have any money for our home. 

[Anonymous]

Tough situation just follow your heart!

[Anonymous]

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@Anonymous wrote:

Tough situation just follow your heart!

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Kento, thanks for the encouragement 😊