Guidance Needed for Mortgage Process 2+ years Ch7 & Ch13 for us

[Anonymous]

We would like to apply for a mortgage with in the next 30-60 days

We have 10% (20% total on hand) to put down on a $250k house as downpayment only (if necessary; or may not have enough to cover closing & downpayment)

DH & I are nearly 3 years 2018 (in June 2021-both) post CH7 Dcharg'd (not on prev house) (dh) & CH 13- Dmiss'd (included my prev home alone) (me).

Gross Income 2020: $82k

Total available revolving Credit: $41k

No lates, charge-offs, or anything for 3 years...current on all

We plan to pull our current mms score once our balances update (around 4/8) to reflect a score boost. However, Our FICO avg range (dh) 715 & (me) 687

Our Debts Currently are :

$9,500 Car Loan (4.29% @ 48mths=$230 mth) DH only on loan (refi from joint status)

$8,000 Student Loan (was inc based payment @ $25/mth), now "pandemic deferred" @ 0% (DH only)

$5,000 Personal Loan (3.5% @$25/mth) (me)

$3,000 on NFCU Amex (10% $20k limit) (joint)

Our questions are:

1. I keep reading Conventional isn't an option of us just yet. Does having 20% down & over 720 mms make any difference? I ask as my bk13 was due to illness leading to my job loss. Is our only option for a mortgage 30 year fixed only FHA at this point? We prefer Conventional...

2. Would there be any advantage (based on home price $250k; income; debt spread) on whether we apply jointly or DH alone?

3. DTI is at/near the .28/.36 marks (front & back), is lower the better, or just be at or slightly below the goal here?

4) How many lenders should you apply with max in this process?

5) Are there any mortgage programs/lender programs that would take us into a conventional loan once completed or look for manual uw?

6) Is NFCU a possiblity at all? Lender suggestions to app?

Any insight or experience you can share would be greatly appreciated...

[DebtStinks]

With most lenders, they'll require 4 years post discharge to get a Conventional loan. Some Non-Qm lenders will do it, but not so great terms. 

With regards to down payment, debt, DTI, PTI, etc....I'd recommend using some of your savings to pay off your personal loan and get your credit card(s) to where only one account reports a small balance of no more than 8.9% of your credit line on that specific account. No need IMO to pay interest on 8k of debt when you have 25-50k in savings.

With regards to debt ratios, FHA has VERY VERY VERY lenient guidelines. If you get (I suspect you would) an AUS/GUS (basically a computer) approval, then you can have debt ratios of up to 56.9%. You'll hear front end/back end ratios as a phrase when speaking about Conventional loans, but FHA is more concerned about the overall ratio and will approve up to 56.9% via GUS/AUS. If you (on the off chance) don't get the GUS/AUS approval, then it goes to manual underwrite where debt ratios would be in the 41-45%-ish range for a maximum.

I hope this has helped and best of luck!

[Anonymous]

Thank you so much for the insight.

That is exactly what we have been struggling with, on whether to pay the $8k student loan off in full or use those funds towards the DP since the interest rate is only 4% (pre-pandemic interest rate, now deferred to 0%). We are still paying the $25-$50/mth anyway...

All the debts are at 4.29% interest or less. Except the revolving the 1 Amex CC balance of $3,000 @ 10% interest.

We, based on your advice, will pay the account down to 8% of the total credit limit of $19.5k for the weeks end. We have no balances on any other cards right now.

***Question: Would paying the $5k personal loan @$25/mth be advantageous even though the loan spread is 10+ years on it? I'm just thinking that the money impact/bang would be greater applying it to the DP instead in order to keep the mortage payment as low as possible. Since the overall DTI is below the range needed already with the numbers we have currently. So many factors to juggle.....

We are trying to maximize the money to "spread" as efficiently as possible.

Especially being a sellers market.

We'd like to place a respectable DP, avoid PMI if possible, possibly cover closing costs, or at least be in position to refi into a conventional loan in 2 years if not doing the non- conforming route.

Let me know what you think....