topic Re: Likelihood of FHA Approval? in Mortgage Loans

Likelihood of FHA Approval?

Anonymous — Fri, 16 Nov 2018 03:58:24 GMT

My fiance and I have both started to rebuild our credit recently. We have both had setbacks knocking us down into the 500's, but we are adamant about buying a house in six months due to a good market where we live. I just want some opinions and advice about getting approved with an FHA.

The facts:
The loan will be in his name. I am self employed, and although I file taxes, I don't know if there is enough of a paper trail for a mortgage (Can any entrepreneurs give me insight into that?) He makes only 32k per year and his FICO is currently at a 540. Right now there's only got his car loan on the report. We've just paid off his two collections accounts so hopefully that causes a small jump? He's added one secured card with only 300 yesterday. We are hoping that adding a secured card with a $2000 dollar balance in addition to the paid collections balance and on time car payments will be enough to hike the score to 580 in six months? We are only looking to buy a 90-120k hone.

Is any of this likely?

Re: Likelihood of FHA Approval?

CreditInspired — Sat, 17 Nov 2018 14:45:14 GMT

Welcome to MyFICO OP

It's great both of you are working on your credit. However, being approved for an FHA mortgage involves more than just scores.

I’m afraid that his income of $32K may not qualify him for a home in the amount of $90-120K. So, if you can show 2 years of self-employment income, that’s good.

Also, do you have the 3.5% for down payment or is a relative going to gift you those funds?

If where you want to buy is a Seller’s market, it may be difficult to get them to pay most/all of your closing fees. If that’s the case, you’ll need monies to cover closing.

Also, is car loan his only debt obligations? Any CCs, student loans, child support, etc. His DTI ratio will also lower the amount he can borrow.

Any late payments in the last 12 months?

Lots of questions to answer when preparing to purchase a home.

GL2U

Re: Likelihood of FHA Approval?

Anonymous — Sat, 17 Nov 2018 14:46:08 GMT

I've read that a 620 is the minimum score needed

Re: Likelihood of FHA Approval?

CreditInspired — Sat, 17 Nov 2018 14:54:06 GMT

Nope 580. It can go lower, depending on lender, but w/10% down vs 3.5%

Re: Likelihood of FHA Approval?

Anonymous — Sat, 17 Nov 2018 15:14:39 GMT

LOL - BRILLIANT! 2009 is going to make a come back!!

Re: Likelihood of FHA Approval?

Anonymous — Sat, 17 Nov 2018 20:33:29 GMT

Yes, we have the 3.5% down and the 10% incase he doesn't make it, but we would most likely just wait instead of trying with 10% down.

We got him a secured card the other day and his vantage scores went up to the 600s (611 and 605). FICO isn't reporting it yet, but when I use the simulation it jumps up to 581 with a card. The only things on his credit were the car and one collections account if $100 that we just paid the other day as well. He doesn't have any other debts. Just hoping we can get him up there before pre-qualification and if 580 or low 600s is actually going to work.

His most recent missed payment was 3 months ago but we just went ahead and paid down on the loan balance and set money into that account so that it pills automatically. By the time we apply it will have been about seven months since last late payment

Thanks for replying without judgment.

Re: Likelihood of FHA Approval?

Anonymous — Sun, 18 Nov 2018 02:41:38 GMT

This is how my VA loan went, also What credit scores are you using? Vantage 3.0 or Fico 5? Around June of this year my credit crashed to 492 after maxing out my card according to credit karma.I had 1 open collection not counting student loans. I got my student loans discharged in July and my score went up to about 580, then around 600 in august. I was still left with the late payments from my student loans, even though they were discharged. 6 when they went to 120 days late and the same 6 when they went in collection for a total of 12 late, closed loans instead of 6. I then got a capital one credit card and bought a truck and a motorcycle. That along with the hard inquiries dropped my credit back down to 560. By october, two months later, all my vantage scores were over 620. Then came the surprise. Lenders dont use vantage scores. Equifax uses fico 5, Experian uses fico 2 and transunion uses fico 4. I had the mortgage company run my credit. The experian fico 4 was 647 compared to 625 experian vantage 3.0. My transunion was 630 using both vantage 3.0 and fico 2. Equifax is a killer. I had 649 vantage with equifax but only 612 with fico 5. Since my middle score was less than 640 I have to have an underwriter and the underwriter would not approve the loan with an open collection. I paid off the collection and got a confirmation that the debt collector would delete all negative history, and they did. The dept collector would not negotiate on what i owed so i went to the original creditor and they settled for the original ammount. I then called the dept collector and told them i settled the dept and they were suppose to give me a letter of deletion in 6 days when they recieved info the debt was paid. The dept collector deleted the late payments and account within 48 hours. After paying off the collection and getting all the late payments removed, my score did not budge. I guess it stayed the same because of the student loan late payments even though they show paid in full. Then, once again the mortgage company reran my credit. Luckily the hard inquirey didnt change my fico score and i was approved for the loan. Dont go by Vantage 3.0 other than to see whats on your credit. Pay for the myfico credit report from all 3 agencies. MyFico report shows all fico scores. Mortgage, auto, credit card. To tell you the truth, there is no reason your credit rating should not go up to at least a middle score of 630 unless either you or your husband has a lot of bad stuff on your report. I hope you had the debt collector remove the late charges, if not, call them and ask them when they are going to send you the deletion letter you were told you would get. Then make sure all 3 credit agencies get a copy.

Re: Likelihood of FHA Approval?

CreditInspired — Sun, 18 Nov 2018 00:21:24 GMT

Hi OP and you’re welcome.

Lates must be older than 12 months even if it’s PIF.

Disregard Vantage scores because they don’t count. Also forget the simulator because it is not a good predictor.

Also, please get FICO mortgage scores because it’s the only one that will count and could possibly be lower than the Vantage sores.

What is the car note? Hopefully really low so it won’t have a big effect on his DTI.

Re: Likelihood of FHA Approval?

Anonymous — Sun, 18 Nov 2018 17:08:03 GMT

Yes, the FICO mortgage score is the one at 540.

I just used the vantage as an example because it just jumped with all our new moves, so I was being hopeful that the FICO might jump as well, especially when the card starts reporting a revolving balance?His score is low because of poor payment history on his car and lack of accounts. He paid the car whenever he wanted without thinkinginh of credit. It's $375... But that's the only thing he has besides the new card. He will likely get one more card with the credit union we want to use for mortgage.

We paid the one collections account he had without asking for a removal... Will it affect his score positively at all?

Re: Likelihood of FHA Approval?

Anonymous — Sun, 18 Nov 2018 19:57:58 GMT

You should try to get all late payments and collections removed from you credit file if you can. They count against your score. Call the Dept collector and request a deletion. Get your disputes over with because the underwriter may not let your loan go through until the disputes are off your credit report. That happened to me. I was able to get several items off my credit report by filing a disput. If i had to do it over again i may have gone ahead and paid the 150 dollars to the credit repair company my mortgage lender mentioned.

Re: Likelihood of FHA Approval?

Anonymous — Sun, 18 Nov 2018 20:01:16 GMT

Did you pay a collection account off or did you just catch up on late payment? If you completely paid off a collections account and it shows closed and paid in full on your CR but still has late payments, then try to get them deleted. If you just got you account caught up but its still open, then its harder to get the late payments off, even if you can.

Re: Likelihood of FHA Approval?

Anonymous — Tue, 11 Dec 2018 22:01:46 GMT

So an update..

His FICO 8 has already gone up to 580, so I don't doubt it will continue to go up in the next few months. Which FICO scores are most used by credit unions for mortgage? Equifax, one of the Experians?

Now there is also the question of derogatory marks. He had multiple late car payments last year, And until recently that was the only thing on his credit. Now he's got a few cards but in a few months when we want to apply, it will still have been only a little less than a year since most recent late payment. We have heard of people getting approved in these situations with a letter explaining why it was late. Does this sound right to anyone?

Re: Likelihood of FHA Approval?

CreditInspired — Tue, 11 Dec 2018 22:18:10 GMT

Hi

I think a letter explaining lates is acceptable if it were due to loss of job, catestrophic illness, etc.