Questions re: Qualifying for Conventional Mortgage and Mortgage Insurance

[bhca]

I am hoping someone can give me some insight on how a lender for a conventional mortgage would look at my situation.  My husband and I are putting our house up for sale.  I have no idea how long it will take to sell, but we are hoping to build in a new neighborhood.  I am concerned about my credit score and lates so here is the info if someone could tell me how I'm looking.  This is as of today:

current score on my fico: 670 (started at 644 in July 2012).

Debt: BOA Visa: 800/6500 credit (the account is not listed as "closed" but I cannot use it, Citcard 407/2400 balance.  Sallie Mae approx. 9K (never late).  No car payment.  I have two credit cards open: The Citicard 407 balance/2400 credit, and a MC with 2000 credit, zero balance.  I have about 60K in reserves (401k), nothing in savings - yet.

The bad news: I have some legitimate 30, 60, 90 and a couple 120 day lates and a couple of paid collections from medical.  They are all over 3 1/2 years old and it has been that long since I have been late on any payment.  I had a mortgage that had two 30 day lates when I owned my own home before I got married (sold that house).

Because I only have 1,200 of CC debt left to pay, I am worried that paying them off will not be enough to raise it to 680 which, from my research is the minimum required to qualify for mortgage insurance.  I have also read that if you have not owned a home within 3 years, you can qualify as a new homeowner and your spouse can too, even if he currently owns a home.  "we" own our home but I am not on the note or the deed.  If we qualified as first time buyers, I'm wondering if that also means they will not take the two lates on my previous mortgage into account.  I am also wondering if, since my bads are pretty old, if they will take them into account at all?

My husband's score is around 780.  He has about 10K in CC debt but his score is always high.  Our combined gross income is around $145,000.  We will list our house at $165K.  We only owe about $123K on it.  Thank you in advance for your help.

[tooleman694]

It all depends on yours bankend ratio, you can go conventional with a 660 fico if your backend is 35 percent with 5 percent down. If it is over 35 percent you will need a 680 score or put 20 percent down

[bhca]

Thanks for the response.  I don't mean to sound ignorant but can you explain the back-end ratio?  I have seen this in my "research" but never really understood how it was different from DTI.  For the house we want, we calculate our mortgage payments will be around $1200 mo.  Our payment now is $1350 as we are on a 15 year note.

[tooleman694]

You have 2 ratios, your frontend ratio and your backend ratio

Your frontend is your mortgage payment, and your backend is your other debt like credit cards and auto loans on top of the frontend.

This is the same as your DTI ratio. So lets say you bring in 10,000 a month gross, and your new mortgage payment is 1200 a month, to make a 35 percent backend you cant have monthly bills greater then 2300 a month equaling a total of 3500. If you are under that you can go conventional with 5 percent.

[JM-AM]

If you are still paying on your home now, you would have to include that in your DTI, unless you sell and close on the home before you purchase new home.

If the house is paid for, then no worries.

You mentioned late payments on home, also mention you are not on the home. So that makes this contradictive, unless Im just not understanding it.

Your lower scores will play a big part in the rate you received.

Make sure you look at all avenues and what makes your overall financial picture make sense, when choosing a loan type.