topic Re: Preapproval chances? in Mortgage Loans

Preapproval chances?

Anonymous — Thu, 07 May 2020 17:39:08 GMT

My FICO EX mortgage score: 736 (haven't checked the other 2 yet, and 90% sure Fiance's are higher than mine, so I went with mine as a lowest possible scenario)

Monthly income before taxes:

Self: $6,080

Fiance: $3,500

=$9,580

Monthly debts:

Self:

IRS payment plan: $375

2 Install loans: $380 (42 payments left), $270 (32 payments left)

Car Payment: $257 (starting lease amount $8995, if I pay $2500 towards it, then it will have less than 10 payments left on lease, willing to do this if it will drop off my DTI)

Student loans: $31,000 (Graduated Repayment Plan $116/mo)

Credit Cards:

Amex- $2400/$15000 limit (paying to $0 by next month)

USAA- $3800/$9000 limit ($70 min payment)

Chase 1: $0/$7400 limit

Chase 2: $0/$7000 limit

Chase 3: $2000/$7000 limit ($40 monthly payment) Planning on paying down next month)

Cap 1: $747/$3500 limit ($35 monthly payment) Planning on paying to $0 soon.

Fiance- only debt $190 Child support

= total monthly debt: $1733

Current lease renting: $2000/mo (Mortgage should be in similar ballpark)

DTI 18%/38%, or 20%/40% if they make me use my 1% of total student loans

One 30 day late on USAA card from 2014 that I found on my Experian report (I'm going to see if they will remove it). Other than that, all payments on time.

Down payment: $40,000 gift from parents (Parents may be willing to gift more if necessary)

Residual funds (ours): $9,000 (we could up this to $15000+ before a December 2020 close date)

House we want: $365,000, estimated loan amount $325,000 (Cheapest in Denver for a new decent neighborhood)

Both of us have 4+ years at current job, hours/salary remained the same during Covid. I'm a healthcare worker, he is salary.

I'm worried my debt is going to ruin our chances. The only debts I could possibly eliminate would be $257 car lease (paying it to 10 months left), and eliminating $70 of the monthly CC debt. (I dont think I can tackle USAA card just yet). Lowering the monthly debt by $327

We want to put a deposit down on a lot for a new builder in late June. Wouldn't close until December 2020/January 2021 accounting for 7 months of building/possible construction delays. But also gives us time to save more residual.

First time homebuyers. Looking to go with Navy Federal Homebuyers Choice (father was in Navy) but I also have a mortgage broker friend as a backup.

Hoping to go 30 year conventional.

Is a $365,000 home (325,000 loan) going to be possible? Looking to get a Preapproval letter next month but I'm terrified of what amount it will say. Every online calculator gives me different info. NFCU's calculator seems to be the most forgiving if I adjust the DTI to 40%. I'm keeping myself up a night running all these numbers through my head. I don't believe we would have payment shock. Rent is astronomical in Denver.

Thank you in advance!

Re: Preapproval chances?

Random_idiot — Thu, 07 May 2020 18:43:47 GMT

They have become more strict with the lending guidelines currently.. with that DTI being that high, as they do include the student loans.. IDK..

and you're planning on only putting 11% down? Yeah expect a denial.

For ref- Chase has increased their requirements to 20% MINIMUM and 700 FICO.

Re: Preapproval chances?

MauiMan85297 — Thu, 07 May 2020 20:29:06 GMT

If you're in the low 700's-740 and with that income you should be able to qualify for a $325k loan amount just as long as your taxes, insurance and MI are no more than $700-$800 max per month assuming you're going Conventional. Totally doable at VA or FHA (close on the county limit depending on where you are).

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 13:37:25 GMT

Thank you for the responses. I appreciate it.

I quickly google searched property taxes and I believe they are 0.75%, I'll have to look more into that.

As far as a denial, would an application come back as Denied immediately? Or could they possibly give me a "condition" of putting 20% down?

Thanks

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 14:30:41 GMT

@Anonymous I have a question regarding the lease. You said pay it down to 10 months? Would that be today or over the course of time? I.E making double payments until close? The issue is if you pay to ten months today but are closing in 7-8 you'd still have to account for the monthly payment in DTI since it would not fully be paid off by the time you app. If you could provide more info on this that would be great! They will exclude from DTI if it's paid fully before close/underwriting but if there's still a balance left it cannot be excluded. Also, the gift funds would have to flow through your account with evidence most likely via your bank statement and the parents bank statement. Just a heads up!

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 15:23:12 GMT

@Anonymous wrote:
@Anonymous I have a question regarding the lease. You said pay it down to 10 months? Would that be today or over the course of time? I.E making double payments until close? The issue is if you pay to ten months today but are closing in 7-8 you'd still have to account for the monthly payment in DTI since it would not fully be paid off by the time you app. If you could provide more info on this that would be great! They will exclude from DTI if it's paid fully before close/underwriting but if there's still a balance left it cannot be excluded. Also, the gift funds would have to flow through your account with evidence most likely via your bank statement and the parents bank statement. Just a heads up!

Oh I see! Did your loan contact tell you that you needed to pay off a car 100% for it to drop of DTI? I've been searching through these forms and I think I saw that if you only have 10 payments left on an installment loan, you can request that it not be included in DTI? That was going to be my strategy but maybe an expert can help out more on that!

As far as the down payment gift, it hasn't been transferred to our account yet, but my parents would be willing to provide their bank statements along with a gift letter, or transfer it over to our account. I saw on some threads that the gift could also be wired from my parents directly to an escrow account? That may reduce the hoops/paper trail?

I'm a bit overwhelmed with options or the right things to do to say the least! 🥴

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 16:36:14 GMT

@Anonymous Hello, sorry reviewing your post that is correct it can be excluded with 10 payments or less as long as it accounts for less than 5% of your monthly income (FHA) and on a case by case basis for a conventional mortgage. While it can be I have seen it is not always the case though I'd say there's a high probability. I would just be weary since they are not required to remove it and with banks tightening up Lending I would confirm with your preferred lender.

I guess to specify my question is how do you plan to pay it down? If you pay it down lump sum today they can exclude it because it would be less than 10 payments at the time of the pre approval. My question was more around how you plan to do it. If you plan to gradually pay it down to the 10 month mark(making larger monthly payments to get it down prior to closing) then it would not be removed for the pre approval but could be removed at the time of approval though this would not help you get pre approved. Sorry for not clarifying!

in summary if you did a lump sum payment today to get it below 10 months it should be able to be excluded from a pre approval. If your lender confirms they will remove it then no problem! But if they say they cannot at this time due to stricter requirements then I would reallocate those funds to pay off other accounts quickly as a way to lower dti. Just my $.02!

I have also seen some lenders not allow a large payment very shortly before applying as a way to exclude this payment just something to be mindful of! Sometimes they require the payment to settle for a couple of months! Like I said just be sure to ask so you are not throwing away money on something that won't provide benefit to your immediate goal!

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 17:53:04 GMT

@Anonymous wrote:
@Anonymous Hello, sorry reviewing your post that is correct it can be excluded with 10 payments or less as long as it accounts for less than 5% of your monthly income (FHA) and on a case by case basis for a conventional mortgage. While it can be I have seen it is not always the case though I'd say there's a high probability. I would just be weary since they are not required to remove it and with banks tightening up Lending I would confirm with your preferred lender.

I guess to specify my question is how do you plan to pay it down? If you pay it down lump sum today they can exclude it because it would be less than 10 payments at the time of the pre approval. My question was more around how you plan to do it. If you plan to gradually pay it down to the 10 month mark(making larger monthly payments to get it down prior to closing) then it would not be removed for the pre approval but could be removed at the time of approval though this would not help you get pre approved. Sorry for not clarifying!

in summary if you did a lump sum payment today to get it below 10 months it should be able to be excluded from a pre approval. If your lender confirms they will remove it then no problem! But if they say they cannot at this time due to stricter requirements then I would reallocate those funds to pay off other accounts quickly as a way to lower dti. Just my $.02!

I have also seen some lenders not allow a large payment very shortly before applying as a way to exclude this payment just something to be mindful of! Sometimes they require the payment to settle for a couple of months! Like I said just be sure to ask so you are not throwing away money on something that won't provide benefit to your immediate goal!

That is really good advice, thank you!! Yes I was planning on doing the lump sum to drop it down, but I will definitely double check if they will require the amount to settle for a few months like you said.

Re: Preapproval chances?

MauiMan85297 — Fri, 08 May 2020 19:30:22 GMT

We can exclude the installment loan if under 12 payments left but in the case of a lease vehicle and not a purchase once you turn in a lease you're more likely to need another car and that's how the UW looks at it as well.

Re: Preapproval chances?

Anonymous — Fri, 08 May 2020 20:36:24 GMT

@MauiMan85297 wrote:
We can exclude the installment loan if under 12 payments left but in the case of a lease vehicle and not a purchase once you turn in a lease you're more likely to need another car and that's how the UW looks at it as well.

Gotcha. That makes sense. I do plan on turning in the car for a new one, but the current lease term would not end until February 2022. Do you think an U/W would be concerned with that far ahead?