Will we be approved? Help please.

[JM-AM]

Pay down credit card UTIL will increase your scores, and make you much more approvable with more Lenders, since it should get you over the 640 score hump.

If going with FHA I would not pay the collection unless you are asked to.

[Anonymous]

Ok so I just got a score alert that my score went up to 646! I also bought my TU FICO and it is a 670 so does that make a conventional an advantage? Thanks again JM-AM.

[JM-AM]

Still at a Tier 6 for Conventional with us, but some other Lenders may have you at a Tier 5.

As of today in my opinion over the course of the loan you would still benefit with FHA over Conventional.

Look at a few online calculators, and play with a home purchase price you are looking into with different rates. Some lenders are still giving 3.25% for FHA, but many of the bigger banks are 3.5% and up for FHA. Conventional at Tier 1 rates are around 3.625 with bigger Banks, and smaller Banks about 3.5%, but with your scores I would guess your rates would be 4.5% or higher. I have seen some come to us with rates of 5%-5.5% doing rate shopping with Conventional loans with lower credit scores.

YMMV between the different Lenders on what they will offer you.

If I was purchasing today in your situation I would choose FHA, since over the course of the loan it would save me thousands of dollars in interest. Just remember this is what I would choose if I felt I would be in this home for 10 plus years. Even with paying MIP (which is PMI for FHA) for the first five years, you still would come out ahead in the long run.

The only time I would consider Conventional is if my scores were 660 or higher, but even then I would still have to compare the rates to see which saves me more money over the long term.

Now this is what I would do today. In a few weeks FHA has some changes going into effect and in a few months when the rules for FHA MIP change I would most likely choose Conventional even with the higher rate.

BTW Congrats on the score increase.

[MovingForward_2012]

Hi and welcome! You are soooo approvable...even though the min requirement for FHA is a 640 mid fico. I see one big point snatcher from your post...utilization. Get the balances paid down on your cards like this:

CC 1: 9% of CL
CC 2: 0% of CL
CC 3: 0% of CL

The magic formula to maximize your score due to utilization is "all zero except one".

Doing the above will give you both that extra point you need to qualify and then some.

Income level looks great with minimal debt. Great employment history...lenders will be drooling over you two! Wishing you the best!

Your best bet is to go FHA. Conventional usually requires a min score of 680. FHA rules are starting to change with the biggest change coming June 3rd, in which PMI will be required for the life of the loan instead of until 78% LTV.

[Anonymous]

Thanks to both of y'all for the help and advice! This is all pretty nerve wracking to say the least. I guess we'll go ahead and apply now with FHA and see what our approval is for. I hope we qualify because we just out down a deposit on the lot we want today.

[JM-AM]

I wouldnt worry about qualifying, you seem to be fine from what you mentioned.

Good Luck and have fun building your new home since it seems like you will be building.