Do we qualify for a conventional mortgage?

[Anonymous]

We are applying together and wanted to see if we would qualify for a conventional or any other loan (not FHA due to the loan limit being only $345k in our area).  Thanks for your advice.

1. Mortgage Credit Scores:

Me

• Equifax: 670
• Transunion: 716
• Experian 740

Partner (Score dropped due to an existing account closing and being serviced by another bank)

• Equifax: 664
• Transunion: 664
• Experian 678

1. Credit Negatives:

Me – No late payment in over 2 years. Collections not paid because I was told by lender that this would drop my score and that I do not need to pay medical collections.

• Type: Medical Collections - $80
• Status: Unpaid (In dispute, not sure what this was for)
• DOFD: 01/16

• Type: Medical Collections - $267
• Status: Unpaid
• DOFD: 04/15

• Type: Medical Collections - $874
• Status: Unpaid
• DOFD: 10/14

• Type: Medical Collections - $1,500
• Status: Unpaid
• DOFD: 5/14

• Type: Ch 7 Bankruptcy with Foreclosure
• Status: Discharged 4/2011

• Type: 1 Student loan, 180 days delinquent
• Status: Payment after charge/off (Account closed due to Navient loan consolidation)
• DOFD: 5/14

Partner – Haven’t been late on an account in the past 2 years. Only late payments are on student loans which were consolidated and in good standing.

• Type: 7 Student loans, 90 days delinquent
• Status: Payment after charge/off (Account is closed due to Navient loan consolidation)
• DOFD: 1/15 (no late payments since due to consolidation)

• Type: 5 Student loans, 90 days delinquent
• Status: Payment after charge/off (Account is closed due to Navient loan consolidation)
• DOFD: 8/12 (no late payments since due to consolidation)

• Miscellaneous: 3 credit cards under 6 months old. However, installment loans are 10+ years old.

1. Gross Income. 

• Combined $142,000 (Me: $78,000, Partner: $64,000)

1. Source of income. 

• Employment: Both W2 and Salaried.
• Me: In the same field for 12 years. Recent job change within the same industry 1 year ago. Continuous employment.
• Partner: In the same field for 6 years.  With same company for 3 years.        

1. Monthly debt payments. 

Me

• Credit Cards: 4 Credit cards, $6700 total limit, $430 balance, minimum required payment $115.       Balance on 3 are below 5%.
• Student loans: $223 / mo., $190k total, currently on IBR.

Partner

• Credit Cards: 3 Credit cards (recently opened 6 months ago), $8,100 total limit, $1,230 balance, minimum required payment $200. Balance on 2 are below 10%.
• Student loans: $280 / mo, $40k total. Not on an IBR program

1. Assets/Reserves. 

• Currently $14,000 in savings, additional $10,000 by June 1st which would total $24,000
• Checking: $1,000
• 401k - $11,000

1. Location:

• Broward County, Florida (Coral Springs, Coconut Creek, Miramar, Pembroke Pines)

1. Property Description:

• Single Family home

1. Property Value. 

• Purchase transaction: 380,000 – 420,000 

1. Occupancy. 

• Primary residence

1. Transaction Type.  Purchase

[NC_Mtg_Loaner]

5% down payment on a $400k purchase is going to be $20k and closing costs and prepaid escrows are likely to be more than $5k but it looks like you have some work to do regarding the savings for down payment.

However, with this income stream I don't see why you couldn't do a conventional loan if you wanted to do a conventional loan but your going to have a high MI payment until you get to 78% LTV.   

 The derogatory collections (medical or not) -- after having completed a BK 7 years ago combined with your minimal savings accumulated and appetite for a $400k home doesn't seem to be the type of behavior that gives lenders that warm and fuzzy feeling, but if you want to make it happen you can surely make it happen so go for it!

[Anonymous]

Thanks for your advise.  We are working with a lender without overlays.  Since the BK 7 years ago I haven't had any issues other than the medical collections.  This would've been paid off but was told that it wouldn't be considered and that if I pay them off my score would drop.  We plan on having around $50k total by November.  I'm guessing FHA would be better than going the conventional route.