Where do I stand?

[mscsinc]

I am planing to buy my first house early next year(will explain why then).

My situation: self employed for 10 years, just incorporated about 1 year ago.

Had 2 car loans and 32k balances on cards until this spring, now everything is paid off. Only thing there is a 3k balance on a 10k card that my wife has(shows up on my credit too.)

scores 8/25 : TU765, EQ 735, EX 712. all FICO.

I expect to have around 35-40k saved up until then.

Income: here is where I think my issue is: 2011 only had 9k profit after write-offs. 2012 went to 24k and this year will probably be around 40k.(this is the reason I want to wait for another set of taxes, to use '12 and '13 istead of '11 and '12)

I am in GA, Atlanta area.

I feel like the income will be my main concern. I'd like to buy in the 180-200K range.

My wife's scores are at least as good as mine, probably a little better.( I have a 120 late payment from Macy's for a $2 balance I forgot about almost 4 years ago)

She's also self employed, but her income(the taxable one) is lower than mine.

SO.... where do I stand? what should/could I improve until next March/April to be in the best shape to qualify?

Thanks in advance!

[ShanetheMortgageMan]

If your company name/tax ID is the same then the fact that you changed it from a Schedule C business to a Corporation should be OK.

How much is the payment on the credit card?

If your 2012 is $24k & 2013 is $40k then the 2-year average will be $2,666/mo.

Your credit scores look fine.

What is your wife's income?  You said it's lower than yours, which could be $1k/year or it could be $24k/year.  Could be the difference between qualifying for what you are looking for or not.

If you had no credit card payment (or $100/mo or less), then on your income alone you could probably buy at $180k with a 20% down payment.

[mscsinc]

HI Shane,

Thank you for your reply.

My business was a DBA. When I incorporated, the name was changed slightly and I had to get a new tax ID.

Her income is around 9-10K for 2012, probably the same for this year.

THe card payment is under 60/month ( $2800 balance on a 10k card), but that will be paid off in the next couple of months.

If I have to use her income too in order to qualify for a larger amount, will that put her on the loan as well?(i suppose so)

Also, I started putting money aside ( regular shareholder distributions from the corp) and I'm keeping it in our joint savings account.

Does it make a difference? should I keep it one of my accounts?

I'm hoping I can get this without having her involved, mainly cause I am planning on getting an investment property down the road and would like to use her credit then.

Thank you.

[ShanetheMortgageMan]

Yes if you want her income to help qualify then she'd have to be on the loan.  With her extra income then you should have no problem qualifying for a $200k home, assuming your income can qualify.  The fact that you changed company names & have a new tax ID will need to be explained in detail that it's the same company but slight alterations were made.  Looking back, I had one client who did that (added "Studio" and "Inc" to the end of his company name, kept the same tax ID though) and he had to write a letter of explanation (well I required him to before underwriting reviewed) and the underwriter didn't have an issue with it, but the acceptability of the income will come down to the underwriter's call.  If everything is explained and nothing changed with the company structure/what the company does, then it probably will work out.

It's fine to put the funds to be used for the down payment into a joint savings account, even if she won't be on the loan then as long as it's in an account that has your name on it then it's no problem.  I would not recommend you keep it in the corporate bank account otherwise you'll need a CPA letter confirming the usage of those funds will not have a detrimental impact on the ability of your company to operate.

[mscsinc]

Thank you for your help. That pretty much answers my questions for now. The company didn't change in any aspect except for the legal structure. I am drawing the money from the business gradually so that I can show regular deposits if it comes to that. All the funds I plan to use for the house will be in personal accounts, and from what I understand, they need to be there for more than 60 days prior to application.