topic Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower?? in Mortgage Loans

Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

ahumanontheinternets — Wed, 05 Aug 2020 23:16:20 GMT

I’m pregnant and my husband and I are hoping to buy a house in the suburbs ASAP. Our financial situation isn’t super straightforward, though. And because my credit score is on the cusp, I’m scared to apply for preapproval and see what happens, lest the hard inquiry drops me into a different score range and limits my options even further. Looking for advice about what my next step(s) should be.

--Our combined yearly income is about $120,000 (gross). Houses in our area of NY are at least $450,000 anywhere worth living. We already pay almost $3,000/month in rent, so affording it isn't the problem. It's getting approved that has us worried.

--Savings is about $10k and family would gift us another $25k - $35k. So we could likely do a downpayment of about 10%.

--Our only debt is credit cards and my student loans. Credit cards are $900/$5,000 and $500/$3,500, so aggregate utilizatoin of about 16% and we could use savings to get that much lower. My student loans are bad, though. Still at $100k after years of (very stupid) deferments and interest. Status is “current/ paying as agreed,” but I’ve had serious deliquincies in the past. Monthly payment is approx. $550.

--I’ve been rebuilding my credit and my middle mortgage score (FICO 2/4/5) is currently 667.

--My husband’s Vantage score is about 720 (haven't signed him up for MyFico), but that’s only because we recently made him an authorized user on one of my cards with perfect payment history. He has no other tradelines and I doubt seriously we can get approved on a joint mortgage. And although I make more than him, we would need to include his income to be approved for the amount we’ll need for houses in our area.

--My mother-in-law has offered to help if necessary. She has excellent credit, numerous assets and practically no debt, and makes roughly the same amount as my husband. She has said that if my husband and I can’t get approved together, she will be a non-occupant co-borrower with me, wherein she and I would essentially buy the house together and leave my husband out of it.

So, my question: With all of that in mind, what should I do next? Obviously the best thing would be to pay down my student loans and work on building my husband’s credit – but the baby makes waiting nearly impossible.

Should we try pre-approval for me and my husband, even though we may get denied and my tenuous credit score might drop slightly from the hard pull? Go see a reputable mortgage broker and see if he/she can help us find a lender to fit our circumstances? Go ahead and accept there’s no way my husband will get approved, and go to a lender with MIL and see what happens? If I tried pre-approval on my own but the approved amount wasn’t enough for houses in our area, could I negotiate adding my MIL after the fact to boost the income / amount?

Thanks so much for any advice!!

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

DebtStinks — Thu, 06 Aug 2020 00:19:16 GMT

YMMW...with your scores where they are and 100k in student loan debt, I'd recommend using a portion of your funds to pay your credit cards down to less than 8.9% and ideally only one card reporting a balance (assuming you have numerous) of roughly 1% of its respective credit line. Let your loan officer know that it's paid in full so they can exclude it from your DTI, but doing this should get you a moderate increase in credit scores....This is, however, assuming all your other scores are very close OR higher. Having a middle mortgage score of 680+ (preferably 700+) should hopefully warrant higher DTI ratios.

Regarding your student loans, different loan programs will calculate a payment equal to 0.5%-1.0% of the loan amount unless/until you can prove that you are on a fixed payment schedule paying less than these amounts.

Also, if debt ratios are REALLY high, FHA via an AUS (automated underwriting system) can approve TOTAL debt ratio up to 56.9%. It comes with upfront and annual mortgage insurance, but this might be offset by the interest rate you would get on FHA vs. what you would be offered on a Conventional loan...not to mention your PMI with a 667 middle score would be a decent chunk on Conventional without 20% down.

I'm not a loan officer, and I'm sure some will chime in...especially if I'm wrong or anything of these factors have changed.

Best of luck!

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

NC_Mtg_Loaner — Thu, 06 Aug 2020 00:47:02 GMT

Go buy a house.

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

ahumanontheinternets — Thu, 06 Aug 2020 18:28:33 GMT

@DebtStinks

That's all increadibly helpful! Thank you!

I've been planning to pay my credit cards down anyway, so I'll aim for one that's at 1% and one that's at 6-7%. Both of my cards report to the bureaus around the 22nd of each month, so I won't reach out to loan officers or attempt preapproval until after, in hopes of seeing a score increase.

Regarding my middle mortgage score of 667 - one score is well below, at 640, and the other is higher at 686. If I don't get a substantial enough bump from paying down the CCs and my DTI remains high, is there a way to try to increase the odds that my application would go through AUS? The concept is fairly new to me, so I'm wondering if there are certain lenders that are known to favor AUS rather than manual underwriting, or if certain criteria (maybe size of downpayment or something) would determine whether it's automatic or manual?

And lastly, any thoughts on what I should do after the 22nd? Whether I should choose a few lenders and attempt preapproval, or if in my circumstances it would be better to use a reputable mortgage broker (or some other option I'm not even aware of)?

Thanks again!

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

ahumanontheinternets — Thu, 06 Aug 2020 18:27:42 GMT

@NC_Mtg_Loaner

Thanks for the encouragement!

(I think. )

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

TheKid2 — Fri, 07 Aug 2020 00:01:52 GMT

Honestly, this is really not complicated credit! I think you're being overly cautious. Get AZEO and get pre-approved!

Re: Mortgage pre-approval with complicated credit and mother-in-law as possible co-borrower??

DebtStinks — Fri, 07 Aug 2020 13:52:47 GMT

You can simply ask the loan officer if their mortgage company (banker if they do their own loans)(broker if they're just the middle man) if the lender will have any overlays. Overlays are additional requirements that the mortgage company can require above and beyond what an AUS will require and approve. Typically (from what I've experienced and YMMV) a middle score above 680 or 700 coupled with 3-6 months of mortgage payments sitting seasoned in a bank account (if not seasoned, from a direct deposit payroll source) will help.

Like a mortgage professional mentioned in a previous comment, I really don't think you have anything to worry about. I'm just trying to give you all the info I can to possibly get you the best terms and easiest approval with fewest conditions listed.

Best of luck and happy home buying!