Should I Apply

[ShowCredit]

I spoke to someone at USDA regarding betting a mortgage.  My scores are   EQ - 688, TU - 683.  I filed BK in 2003, have since bought a house and sold it and paid it off.  I have a few late payments 2 years ago.  I make $42,000 per year and want to purchase a house for around $120,000 - 150,000.  Do you think I would be approved?  I have 1 CC, 1 car loan, and student loans.  Haven't paid anything late in 2 years.  I have 2 collections on EX that I am disputing.  Never heard of them before I saw them on my report.

What are my chances do you think?

[donkort]

I'd say you should apply.  The LO might ask for "letters of explanation" pertaining to the lates. 

What matters perhaps as much as credit score is debt-to-income ratio.  I would estimate that you gross about $3500 per month, which means that the LO (if you're going FHA) would not want to you to have more than about $1435 per month in total payments.  This is based on a 41% Debt-to-income ratio, their uppermost standard.  If you're going "conventional," the DTI requirements are probably more stringent, in the area of 35%. 

If you're planning to buy a $130000 house with a 20% downpayment, the mortgage would be $104000.  At 5% interest for 30 years, the straight mortgage payment would be about $553.  Of course, one must include taxes and possibly mortgage insurance (though, I believe, mortgage insurance is not required if the downpayment is 20% or more, and your credit score is above (680?).   If the total payments for the mortgage plus taxes, say, are $700, that leaves you with about $735 for your student loan, car loan, and credit card. 

I'd say give it a try.   Especially if you're going FHA or USDA. 

Please correct me if I'm wrong, experts.

[Anonymous]

I'm far from an expert but I was just told by my mortgage person that if you go FHA, even if you put 20% down, you still have to carry PMI for one year.  After that year they will reappraise the property and waive it if you have 20% equity.  

[ShowCredit]

Thank you for your response.  I think I will apply with USDA next week.  Right now my rent is $1100, double what the mortgage would be.  That would be fine.  I will call them again on Monday and hear what they say.  I do gross about $3500 per month not including overtime.  My monthly payments total about $1500.  Student loans are deferred until 2012.

I just got a car loan of $24,000 at 5.49%, so hopefully I will get a great interest rate on the mortgage.  No late payments in 2 years.  I just looked at some houses in the are where I want to be and they do have some between $130,000 - $200,000.  I don't want to have to offer any more that $140,000 and ask the seller to pay closing costs.

[hawkeye33]

The biggest issue I would see, not knowing specific numbers (your cc balances vs. limits, auto loan payments, etc.), is with the two collections. From what I have seen and read on the boards, it's difficult to get the loan through underwriting when you have anything on your report that's current in dispute. You should try to get those resolved quickly as I've seen few, if any, people around here that have been able to close a deal with disputes on the report.

[ShowCredit]

Hawkeye33,

Thank you.  I will speak with USDA and hear whay they say.  I am trying to get these collections resolved as soon as possible.  I may have to pay them, hopefully I can do PFD and get them off as quickly as possible.