Will Back-Owed Child Support Deny FHA Loan?

[Anonymous]

My husband and I are considering applying for a mortgage next month. First time homebuyers with some shaky credit history. I feel pretty good about most things on our credit now except for about $4,000 worth of back-owed child support that is on hubby's credit that shows as a collection. For several years he has paid more every month (and still is) to pay it down and there is no way we will be able to wipe it away before applying. He has a very low credit score (510 or so) mostly because I think he has very little credit. He has never had a loan or credit card, ever and only has an installment account for a TV, two collections (paid) and the child support thing. My credit is in much better shape after spending a year of paying things off. Credit score about 630 for me. We gross about $6,000/mo have DTI about 20% and are looking for a loan under $90,000. We live in Michigan. What are the chances we will get approved for an FHA loan with the child support debt looming? Would we have a better chance with conventional?

Thanks for any advice.

[Anonymous]

If you have the 10-20% to put down for a conventional why not just pay off the back child support and try FHA? If it's reported on his credit report I'm assuming it will need to be paid before closing.

[Anonymous]

Minimum FICO for FHA is 620.  You won't be able to get a loan with your husband if his scores are in the 500's.

[Anonymous]

We have very little of our own money to use for down payment or fees associated with buying a house. We plan to use the down payment assistance that is offered by the Housing Authority in Michigan for down payment/closing costs. A co-worker of mine used to be a loan officer for small business loans and she said sometimes lenders just require a letter from the court stating that you are paying it down. Not sure if that is true in this case.

[Anonymous]

The information that I have read posted on the Michigan Housing Authority's website states that there is no minimum score but 620 is recommended.

[DallasLoanGuy]

No minimum score but 620 is recommended:

Because almost every lender requires 620..... regardless of what dpa or fha wants

You need to get him some credit. Maybe add him as user on your credit cards? <= this is only ethical if he is financially responsible for those debts.

fha doesnt specifically address the child support. but if it is being paid ontime  for several years then it shouldnt be a problem.

the problem is scores.

time to establish credit for a whi;le and see what happens to scores.

[Anonymous]

Thank you. : )

[ShanetheMortgageMan]

I didn't see where you said you needed his portion of the income to qualify - and it doesn't take a whole lot of income to qualify for a $99k home unless there are a lot of consumer debt payments (credit cards, cars, student loans, etc.).  Since Michigan is not a community property state, if you were to go with an FHA loan there is no requirement for your husbands credit to be checked to incorporate his debt payments into your DTI nor to evaluate his credit worthiness. 

[Anonymous]

Yes, I am thinking of just applying by myself. It may be less complicated and I probably have a better chance of getting approved. Is it possible to add him to the mortgage down the road or at least add him to the title/deed of the house?

[ShanetheMortgageMan]

You might be able to add him to the deed/title of the home through the purchase, not after, it's up to the lender but I've done it several times in Michigan without any issues.  After the fact though, you have to get your lender's permission, which is often tougher getting answers from their servicing department than when you were going through underwriting approval.