Would I Qualify?

[Anonymous]

I am currently in a rent to own situation. The best part is 100% of my rent goes towards my down payment. Not your standard rent to own, I know. 

Currently my FICO 08 scores are EQ: 644  EX: 648  TU: 650

I do have some old CO's, and one CA from back in 2010-11 before I finally started working again (Had a hard time finding work for a little while). All 4 CO's were paid in full, and the 1 CA was paid, and I am working on getting them removed entirely if I can. I realize having baddies on my reports don't help my chances. 

Yearly Gross Income: 50K (As of this year) - Hourly W-2 Accountant since June 2011. Two bonuses a year, and plenty of overtime so 50K could defintely end up being more by year end.

Monthly Debt: $400 car payment. Currently very little CC debt. Paid in full every month as of recently.

The property is a condo in Lake County, IL for $75k and would be my primary residence.

I don't have much savings, but I do have a Profit Sharing Plan with about 15k, but I am unsure if I am able to pull from it. I work for a rather small, but very profitable company as an Administrator/Accountant so it's definitely not off the table,..

I would really love to qualify for a conventional mortgage, and not have to go the FHA route. And, I'd also like to avoid any PMI. Am I crazy to think I'd qualify with those scores? I realize the FICO 08 scores are not mortgage scores, but I would hope they aren't too far off. I look to pull those scores come June-July.

[frugalQ]

For conventional, I recommend getting scores up to at least 680 to avoid higher rates. You can go down to 660, but the added pricing on the interest rate will be material. 640 would be even higher

In order to avoid PMI, you will need a second mortgage. those rates are naturally higher. You can imagine what your int rate would be for a 640 score.

Assuming your mortgage score is 640, you can go conventional but you are def going to pay for it.

Good luck.

[Anonymous]

I think I could definitely get my scores up to 660 by the time frame I am looking at, and I realize my interest rate will probably be higher, but why would I need a 2nd mortgage to avoid the PMI ? 20% of the price of the condo is $15k, and I have about 8k to put down @ the moment. If I can get the other 7k somehow I wouldn't need a 2nd mortgage, correct?

Also, let's say I do end having a higher interest rate. I can always re-finance for a lower rate down the line, right? How long before people are able to refi after purchase? A year?

[StartingOver10]

I don't want to burst your bubble, but there are restrictions placed on how much of your rent can be attributable toward the down payment. These restrictions are placed by the lender (and Fannie and Freddie).

The way it works is any amount that you pay in rent over and above the market rent is allowed to be applied toward your down payment. They will not count the rest of the funds. You need to speak directly to a loan officer that is familiar with using rent to own type down payment funds so you get the information directly from the lender you plan to use. You may have to speak to several lenders.

You can refinance anytime after purchase, but each time you refi you pay closing costs. Those ads you see for no closing cost refi's usually bump the rate to include in the fees.

[Anonymous]

---

@StartingOver10 wrote:

I don't want to burst your bubble, but there are restrictions placed on how much of your rent can be attributable toward the down payment. These restrictions are placed by the lender (and Fannie and Freddie).

The way it works is any amount that you pay in rent over and above the market rent is allowed to be applied toward your down payment. They will not count the rest of the funds. You need to speak directly to a loan officer that is familiar with using rent to own type down payment funds so you get the information directly from the lender you plan to use. You may have to speak to several lenders.

You can refinance anytime after purchase, but each time you refi you pay closing costs. Those ads you see for no closing cost refi's usually bump the rate to include in the fees.

---

Even if the contract, and lease that was drawn up specifically states that a specified amount of that rent is to do towards my down payment should I choose to buy? 

[frugalQ]

If you have 20% downpayment, then you would not need a second mortgage.

[Anonymous]

---

@Anonymous wrote:

I am currently in a rent to own situation. The best part is 100% of my rent goes towards my down payment. Not your standard rent to own, I know. 

Currently my FICO 08 scores are EQ: 644  EX: 648  TU: 650

I do have some old CO's, and one CA from back in 2010-11 before I finally started working again (Had a hard time finding work for a little while). All 4 CO's were paid in full, and the 1 CA was paid, and I am working on getting them removed entirely if I can. I realize having baddies on my reports don't help my chances. 

Yearly Gross Income: 50K (As of this year) - Hourly W-2 Accountant since June 2011. Two bonuses a year, and plenty of overtime so 50K could defintely end up being more by year end.

Monthly Debt: $400 car payment. Currently very little CC debt. Paid in full every month as of recently.

The property is a condo in Lake County, IL for $75k and would be my primary residence.

I don't have much savings, but I do have a Profit Sharing Plan with about 15k, but I am unsure if I am able to pull from it. I work for a rather small, but very profitable company as an Administrator/Accountant so it's definitely not off the table,..

I would really love to qualify for a conventional mortgage, and not have to go the FHA route. And, I'd also like to avoid any PMI. Am I crazy to think I'd qualify with those scores? I realize the FICO 08 scores are not mortgage scores, but I would hope they aren't too far off. I look to pull those scores come June-July.

---

As a reminder, your Fico 8 scores don't mean anything for a mortgage. You need to pull your motgage scores and work from that. When you buy a report, myFico now gives you mortgage scores so you can get one of the 3-bureau reports and get them all in one fell swoop.