FHA Newbie, Cash/Debts questions

mizvalentine · ‎08-22-2012

Hi everybody! I am just starting the mortgage preapproval path and need some advice.

I want an FHA 203(b) loan, due to the low downpayment required. I have a good income for our area ($63k salary + about $5k/year freelance) and have been employed steadily my entire life, though I am new at my job (a couple months). I am trying to qualify for $250k mortgage on a multifamily (I will occupy one unit); our area is great for rentals, so I could cover almost the entire mortgage with rent (but wouldn't need to, in a worst case scenario). My credit scores are 696 TU and 755 EQ (real FICO). I have a $6k car loan and about $25k in student loan debt, no other debts except the usual cell/cable/internet (do they count these?). I'm about to pay off my cc debt completely.

Is there anything I can do to improve my chances of getting this loan?

Also: I'm unmarried but several family members want to help with the purchase via gifts (I have no real savings). My parents are willing to put up the 3.5% and closing costs and provide documentation of the gift. However, another family member only wants to give me cash and doesn't want to provide documentation. Is it okay if that family member pays off my car loan directly, instead of giving me cash that I can't provide a paper trail on? Or should I just have them wait til after the closing to make the gift? I thought eliminating the car loan might improve my DTI ratio (I'm a little over the 28% guideline now) but I'm afraid it will look weird or count as a gift.

Also, I have 2 baddies that are due to age off my CR in Sept. I'll also be paying off my CCs this month as I mentioned, but that won't show up on my CR til the cards report on Sept 19. Should I wait til the end of Sept to apply for a loan to get the bump on my FICO, or does it matter?

Thanks for your help, I'm sort of afraid to ask the loan officers about these questions because I'm afraid I'll say something that will cause them to reject me! This whole thing is way stressful.

Anonymous · ‎08-22-2012

I am in the middle of the mortgage process myself and just came across a similar issue. The gifts, cash must be able to be sourced with documentation. If your parents give you the down payment, they'll have to show that bank statement showing the withdrawal. If the other family member gives you cash, you will have to have them show the withdrawal. I'm not familiar with the car paying off scenario.

Good luck! I agree that it's stressful, it's the worst experience of my life! I try to keep it in perspective, if it doesnt happen its a disappointment, not a life or death issue. However my alleged closing date is next week and no clear to close as of yet. The anxiety is tremendous, it has surprised me.

Anonymous · ‎08-22-2012

I know exactly how you feel...I applied July 3rd and have been on pins and needles, especially once I knew I was going to underwriting almost two weeks ago. I just got the call today saying that I have final approval to start building. I feel like a weight has been lifted off me finally!

mizvalentine · ‎08-23-2012

Thanks for the reassurance guys....I'm glad to know I'm not the only one who finds this all VERY overwhelming! Blargh.

So here's another question I came up with last night...I have a salary job, and also freelance on the side. My boyfriend also occasionally shoots me some cash for household expenses (he's unemployed at the moment but helps me out where he can). When I deposit freelance checks or his cash in my account, am I going to have to justify those?? I won't be using any of that cash to buy the home (and all of it goes to my credit cards or other debts almost immediately anyway), all my downpayment money will come as a gift from my parents... do I have to justify every cent of income, or just the funds being used for the home?

Anonymous · ‎08-23-2012

From what I understand, any large deposits that are non payroll in your account may need explanation which your LO would ask you for a letter of explanation. They just want to make sure you can afford the mortgage plus your other bills based on your income and not from other sources. Hope this helps.