Will I get approved?

[mkass]

Annual Income:  90K yr  (will add my GF if she brings credit score up to 620 - her income is 60k Yr)

my score:  642 TU / 638 EQ - should go higher once I lower my util to 5% - currently at 90%

I have 1 paid collection and one 30 days late from Jun 07

her score: 609 EQ - with 5 unpaid collections ($12,000)

Downpayment: $20,000

I want to go thru FHA and home we're looking at is about 420,000.  I have no other payments.  What are my chances of being approved?  can I apply on my own or do I need to add her to qualify?  I would like someone's opinion if I should wait or try soon.

[ShanetheMortgageMan]

Just with your own income, on that sales price, your debt ratio would be 39.15%.  That isn't too high for your "total" debt ratio", which FHA prefers to be no higher than 43%, but it is high for you "housing" ratio, which FHA prefers to be at 31%.  Now just because it's higher than what FHA prefers doesn't mean you can't qualify, if you have some compensating factors (such as if you only use the $20k for the down payment of $14,700, and keep the remaining $5,300, basically getting the seller to pay all of your closing costs), then you'd have some reserves leftover to help compensate for the higher than usual housing debt ratio.  If you have 2 times the proposed payment saved up in reserves after closing, then that will likely do the trick.  Estimated payment on $420k sales price would be about $3k, so you'd need $6k after the down payment/any closing costs you'd be responsible paying for.  Once you add your girlfriend though, the housing ratio drops to 23.5%, and that won't have any issues for anyone.  I'd apply by yourself, if you can't qualify on your own, then wait until your girlfriends scores improve after the new utilization reflects on credit.

[mkass]

I forgot to mention that seller (builders)will pay $10G closing cost.  I also have $63G for my 401K but out of that, there is $35K on a loan.  They take out payments from every single paycheck.  I also plan to have about $10G reserve in my account before I apply.

I would like to apply with my GF but I'm concerned that she needs to pay off all her collections first (6 yrs old).  Can that be negotiated with lenders to pay at closing so that it doesn't decrease her score if paid prior? 

Can this be counted as income if you know that you're going to rent part of your house out to friends?  I have two friends that will rent out 2 rooms @ $500 per month ea. 

[mkass]

bump!

[Anonymous]

Some lenders won't make you pay old collections but that may be a problem because of the amount of her collections.

Does she have any credit cards she can pay down? That's the fastest way to get the small bump in score to 620 she needs.

[ShanetheMortgageMan]

Lenders are very unlikely to require collections that are 6 years old to be paid, unless they specifically have a policy which requires over a certain aggregate amount with no exceptions made.  If you were not to be able to find any, then it's almost always acceptable to have them paid off at the closing rather than before the closing.

60% of the vested amount in your 401k can be used for qualifying, so sounds like you'd have plenty of reserves to help compensate for the housing debt ratio if you chose to forge ahead with just yourself.

The renting a room to friend income, called boarder income, isn't able to be used as qualfying income.