Should I do this now or after 640 Mid Fico?

[Anonymous]

I have been trying to prepare to buy a house, and in doing so, ended my rental agreement and have been staying with my mother in order to save.  It's only been 2 months now, and with paying down some cc's (still at 75% utilization) and moving expenses/storage, I have right around 1k immediate cash.  I'm seeing prices in my area (Virginia) drop steadily, but with my income, want to desperately qualify and cover more than I can. 

Income: 39-40k

Fico's: 613, 639, 661 *note waiting for cc balances to update, so may be SLIGHTLY higher in a month or so..

Car pmt: 400/mo

Other monthly: 100.00

- I thought of trading down on the car to lower my payment, but would be in the red on the loan.  I thought of refinancing, and going through BofA, but they require better scores I think- moreso than for a mtg loan.  Not sure what to do about the auto loan.

Should I do this now??  I want to go through B of A just from a word of mouth referral, but would take any suggestions out there..   A property that I'm interested just listed for 187k- is there any loan product that would make this work?

[ShanetheMortgageMan]

First, make sure you would be comfortable for a mortgage payment on a $187k home.  Not sure where in Virginia you are, but you could probably expect a total PITI payment in the $1,500 range.  With your other debts, that is around 60% of your gross income... are you comfortable with that?  To me that is a little tight.

Bank of America is a solid mortgage lender and has some good products.  One of which is for individuals who make less than 80% of their county's median income (which you can look up at https://www.efanniemae.com/sf/refmaterials/hudmedinc/index.jsp) or who are buying in a low-to-moderate income census tract (you can look up each property address at http://www.ffiec.gov/Geocode/default.aspx), if you fit one of those eligibility categories, and since you have a 620 score, their program called "Community Accommodation" should be a good fit.  It doesn't require any reserves (so you having $1k would be fine), requires a 620+ mid score (so you would meet that), and does 100% financing in the format of an 80/20 combo loan, so there is no mortgage insurance.  It's not offered in every state, but Virginia is one of the states it is offered in.  The area you are kind of borderline on is your debt to income ratio, the debt to income ratio limit on this program is 60%, and yours is right at that level.  It can permit a higher debt to income ratio with certain compensating factors (one of 15 different compensating factors is needed), so you might be OK there, you'd just have to apply and find out.  Community Accommodation is not available through all avenues of Bank of America, so not sure which avenue you are planning to go with (there is a branch, calling up the 1-800 number, or working with their Bank of America Mortgage division), but if you aren't going through their mortgage division, I can recommend someone who works in it for you if you PM me.  In my opinion, the most knowledgable loan officers at BofA work in their mortgage division, not at the branches or at the 1-800 number, plus the mortgage division has access to more of the mortgage programs that BofA offers.

[Anonymous]

More information is probably needed.

Is your income after taxes?
How much is your CC balance?

[Anonymous]

Shane, thanks so much!!  That's a huge help..and a much-needed dose of reality as far as what I can handle. 

Question: Should I try now or wait until a month or so when my fico is up a little?  Would the mortgage person run my info again if it improves my situation?   I can't tell with the market conditions what it means to be at 640 or above.. some sources give me a interest rate range for 620-660, so I'm just not sure.  Do you think prices will continue to drop through Spring?  Don't want to miss an opportunity if it pops up..

THANKS SO MUCH FOR THE FEEDBACK!!

[Anonymous]

This is not the market of 2001-2005  - there is NO RUSH, no immediate.  Slow down - be completely prepared to do this.  Look at everyone going into foreclosure - they were in a 'rush'; had to have it NOW.

You have NO money saved; yes, there is a program for you - but is it the right program?  Can you live with 60% of your income going for bills.... IMO - you will be 'house poor'.  Only do this if you are expecting a large salary increase in the next 1-2 years.

[sunrise]

Lady_Scarlet is right, slow down....you will be in a better position later...even if you only wait til the end of the year!! 

This is what I would suggest, SAVE $1500 a month (the amount that your mtg. payment would be)...do this for 6 months...if you didn't struggle and still managed to pay all your bills and not change your lifestyle, then you are ready for this mortgage!!  Plus, you will have saved almost $10,000 to put towards your next home!!  This is just a suggestion!!

In the mean time...housing prices more than likely WILL NOT increase, you may be pleasantly surprised to find out that prices will decrease...and you may end up with many more homes on the market to choose from.  JMHO!! 

Best of Luck with your decision!

[sunrise]

BTW...Lady_Scarlet is in real estate...so, she knows her stuff!!  And, waiting....even just 6 mo's will give you time to get your cc debt down and raise those scores!!  Try to get your cc debt down under 10% util...you should see a nice score boost! 

 In just over a couple of months I paid my cc debt down from 90% util to around 3% util and my scores jumped...one score went up 80 points!!

My scores were low 600's in Nov., they are now all in the 680's!  680's will give you the best rates for mtgs!! 

Patience is the key here!! You are so close..just give it time! 

[ShanetheMortgageMan]

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ficofairy wrote:

Shane, thanks so much!!  That's a huge help..and a much-needed dose of reality as far as what I can handle. 

Question: Should I try now or wait until a month or so when my fico is up a little?  Would the mortgage person run my info again if it improves my situation?   I can't tell with the market conditions what it means to be at 640 or above.. some sources give me a interest rate range for 620-660, so I'm just not sure.  Do you think prices will continue to drop through Spring?  Don't want to miss an opportunity if it pops up..

THANKS SO MUCH FOR THE FEEDBACK!!

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For that program a 620 score qualifies just as easily as a 680 score would... however I would suggest getting your credit cards completely paid off and saving up some money.  Like others have pointed out, you want to be in a very comfortable financial position when you purchase a home, not just barely making it (which in my opinion a 60% debt ratio is something you'd want to reduce before taking on the purchase).  I love sunrise's suggestion of saving the anticipated mortgage payment each month and if you are comfortable doing that, then you know that buying a home is the right move for you.