Shane or Dallas, what are my chances for FHA approval?

[Anonymous]

We would like to obtain an FHA loan on a new home and turn our current home into a rental. Here's tour ifo:

$120,000 - amount owed on current mortgage ( in husband's name only. little to no equity.)

$195,000 - asking price for new house

   $60,000 - husband's salary ( 10 yrs on the job)

   $20,000 - my salary ( self-employed for 2 years, school before that)

658 - the lowest of our credit scores due to a recent oversight

3.5 % - amount available for down payment

 $300- estimated monthly debt

What are our chances for approval? Let me know if you need any more info. Thanks!

[Anonymous]

Here is what I see.

A couple questions, has the SE income been for 24 full months yet, and is that 20K after deductions or before deductions.  If you are writing off business expenses, they will go by the amount after deductions.  In either case, you are going to be close on DTI if youhave any other substantial debt (car loans, student loans, etc.)  Also I would not be surprised if they want to see a bit higher down payment for a second home purchase, but not sure on that.  Alot of it will depend on the counted income, DTI, and what the actual mortgage payments and taxes, etc are for your local area.  To really help, we would need to know all monthly credit payments you have, and what you would expect your payment on the new home to be, as well as specifics on the self employed income.  (they will want to see 08 and 09 taxes to prove that income and to verify write-offs. 

[Mark_in_Pasadena]

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@Anonymous wrote:

We would like to obtain an FHA loan on a new home and turn our current home into a rental. Here's tour ifo:

$120,000 - amount owed on current mortgage ( in husband's name only. little to no equity.)

$195,000 - asking price for new house

   $60,000 - husband's salary ( 10 yrs on the job)

   $20,000 - my salary ( self-employed for 2 years, school before that)

658 - the lowest of our credit scores due to a recent oversight

3.5 % - amount available for down payment

 $300- estimated monthly debt

What are our chances for approval? Let me know if you need any more info. Thanks!

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Assuming that you won't be allowed to claim the expected rental income on the first home until it actually reports on your 1040 tax returns & that your self-employed income is actually $20,000 per year after all deductions, you should still be able to qualify for a maximum ~$382,000 loan for 45% maximum DTI ratio, based on your combined household income of $80,000 and $300 in other monthly debt servicing, and a 3.5% downpayment.  Since both of your homes add up to only $315,000, then it shouldn't be an issue for you to qualify based on a 45% max DTI ratio.  

Second homes usually require a much higher LTV ratio, so you might need to pony up more than 3.5% for a downpayment.